Mortgage Demand Hurting Wells Fargo?

January 27, 2009 No Comments »

wells fargo mortgage

Here’s an interesting tidbit.

Apparently Wells Fargo hasn’t been able to lower mortgage rates as much as they’d like because the company can’t keep up with the demand and related costs of originating all the new loans.

Wells Fargo Home Mortgage co-president Cara Heiden told Bloomberg in a telephone interview that mortgage lenders are increasingly uncertain about how many applications will be declined, which ups their expenses.

Adding to that uncertainty is the lack of available staff to meet the high volume of applications piling up at lenders’ doorsteps amid the lowest interest rate environment in history.

Mortgage rates on the popular 30-year fixed hit a record-low 4.96 percent in mid-January before inching back over five percent in recent weeks.

Heiden noted that if lenders were to offer even lower rates, they wouldn’t be able to handle the resulting volume.

Add to that the fact that many loans are being turned down for issues like insufficient income, low property values, or negative equity, and you’ve got a losing proposition on your hands (not to mention all the borrowers double-apping).

“Greater uncertainty about so-called pipeline fallout rates also is boosting lenders’ expenses in their use of derivatives, such as forward-sale contracts and options, to hedge against interest-rates changes before they sell the debt, Heiden said.”

Wells Fargo, like most other lenders out there, is offering primarily government-backed loans that can easily be sold on the secondary market.

Bank of America spokesman Dan Frahm told Bloomberg that it was “aggressively working” to increase capacity in an effort to serve more customers, which should lead to more competition and lower interest rates.

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