Wells Fargo & Co. said it is tightening underwriting standards on home equity loans as it takes a $1.4 billion fourth-quarter write-down on loans originated through wholesale and correspondent channels.

The San Francisco-based bank said it will no longer originate home equity loans through wholesalers when the combined loan-to-value ratio of first and second mortgages exceeds 90 percent or when Wells Fargo is not the holder of the first mortgage.

Wells Fargo officials said they are placing loans that don’t meet those criteria — and all home equity loans acquired through correspondent channels — into a “special liquidating portfolio,” which is expected to rack up $1 billion in losses in 2008 and 2009. The losses “are expected to diminish over time as the loans are resolved or repaid,” and fall within fourth-quarter loss provisions.

Loans in the $11.9 billion liquidating portfolio — about 3 percent of all loans outstanding as of Sept. 30 — “are largely concentrated in a few geographic markets that are experiencing the most abrupt and steepest declines in housing prices,” and represent the highest risk in the company’s $83.4 billion home equity portfolio, Wells Fargo said in a regulatory filing.

Most of the remaining $71.5 billion in loans in the home equity portfolio were originated through the retail channel, Wells Fargo said, including $11.5 billion in first-lien loans. Second-lien-position loans included approximately $36.8 billion behind a Wells Fargo first mortgage and approximately $17.6 billion with a combined loan-to-value ratio of less than 90 percent and not behind a Wells Fargo first mortgage.

Wells Fargo officials said they are no longer making home equity loans through correspondent channels, such as other financial institutions and mortgage companies

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription