Wells Fargo Raises Rates: Are Homeowners Out In The Cold? (update)
“They’re pulling themselves out of the market to regroup,” is what one of my mortgage broker buddies told me on the phone this morning when I asked how in the heck Wells Fargo could raise rates on a 30-year jumbo fixed rate mortgage from 6 7/8% to 8% overnight. A jumbo is anything over $417,000, and given today’s home prices, that’s going to hit an awful lot of borrowers.
So, since Bank of America , BB&T , Sovereign and others are still at the old rate, no borrower in their right mind would go to Wells Fargo. My buddy says no biggee, Wells Fargo can afford to shut down its mortgage division for a while until all this shakes out. Well, I think it’s a biggee.
Then he tells me he got an email this morning from Vertice, which is part of Wachovia, saying:
Based on current market conditions, investor appetite and liquidity for Alt-A features, including higher LTV/CLTV products and reduced documentation types, have all but disappeared. In response, Vertice is announcing the temporary suspension of a number of programs effective immediately.
This means they’re pretty much not doing Alt-A loans anymore (these are the loans somewhere between prime and subprime--the “low-doc” or “no-doc” loans with no income verification). There’s just no liquidity for Alt-A. The CDO’s are not being packaged and sold anymore because there’s no market for them, so forget it.
Just got a call from another mortgage broker buddy (I know, I need to get a life). She called from the Hamptons to tell me that yesterday, she was doing a million dollar 30-year fixed for a client, and the spread she got on possible rates was 6 7/8 to 8 ¼ (!!) “Can you believe that???” she said. Unfortunately, I can. More to come.
Update: I want to clarify a few things. When I use a quote from a mortgage broker saying Wells is pulling itself out of the market, that’s the broker’s opinion of what that 8% means, not an official statement from the company. Now, as I said on TV, but which I didn’t clarify on the blog is that the 8% rate is for loans coming through brokers, ie broker-originated. If you go directly to Wells Fargo, you will likely get a better rate.
Update #2: So just for fun, I ran a search on a jumbo 30-year fixed rate mortgage today, for $500,000, with 20% down on my imaginary home, no points on the mortgage. Here's what I found:
Wells Fargo: 8%
Bank of America: 7.94%
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