According to American Banker’s Kate Berry,
Wells Fargo is raising minimum credit score requirements on Federal Housing Administration loans, part of the ongoing jockeying by large banks to limit lawsuits by the Justice Department for defective FHA loans.
John Shrewsberry, Wells Fargo’s CFO, said Wednesday that the San Francisco bank will not make loans to FHA borrowers with low credit scores because of their higher rates of default.
“We will be adding back the credit overlays so we make fewer loans that are close to [the FHA’s] most accommodative end of the credit spectrum,” Shrewsberry said at the Barclays Global Financial Services Conference in New York. “Those are the loans that are going to default and those are the defaults loans that we’re going to be arguing about 10 years from now and we’re not going to do that again.”
Actually, I testified in the House or Senate that I was surprised that banks were still originating mortgage loans since you get raked over the coals … if the borrower isn’t clothed in AAA-armor coated with gold. And the mortgage isn’t something that is disdained by regulators, like the CFPB.
This is success? Lowest new home sales (adjusted by population) and crashing homeownership rates?
Is restricting mortgage designs and the supply of credit the same as “success?”