Wells Fargo Closes Subprime Business, HSBC Next?
Pretty soon HSBC Finance and HSBC USA may be stuck with all the subprime business. Wells Fargo is closing its subprime business. This means it may be even harder for HSBC to find a buyer for its subprime and consumer lending operations unless they sell to an overseas investor who can benefit from a weak dollar.
Wells Fargo & Co., the second-largest U.S. mortgage lender, said on Thursday it will close its subprime wholesale lending business, which processes and funds loans for third-party brokers, citing turmoil in the market for riskier home loans. The company will shut operations in Baton Rouge, Louisiana, causing a loss of 170 jobs, and in Des Moines, Iowa, where it will seek other jobs for 67 workers. Wells Fargo also cut 444 subprime jobs last winter.
The San Francisco-based company, which is also the fifth-largest U.S. bank, said its subprime wholesale lending business last year represented 1.6 percent of its $397.6 billion of residential mortgage loans. “The risks were not worth what we were being paid by investors for our loans, and we don’t see changes in the foreseeable future,” Michael Lepore, executive vice president of institutional lending at Wells Fargo Home Mortgage, said in an interview.
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Wells Fargo will still offer subprime loans directly to consumers through Wells Fargo Home Mortgage, based in Des Moines, and its Wells Fargo Financial unit.
I am confused…If HSBC is in such a bad “pickle” why is there stock 3 points away from an all time high, why “honest” lenders like Countrywide (CFC) and IndyMac Bank (IMB) are at an all time low. Simple…the retail model works. The reason for this “subprime crisis” is due to option ARM’s and Interest Only loans marketed to people who do not understand how they worked. HFC/Beneficial never got into these type of loans because they were not a good deal for the borrower. I know it is hard to believe that everyone does not qualify for 6%. Creative financing tightened up the whole market, so if you are not showing a 680 FICO, good luck at borrowing money at ANY rate.
HSBC may not have participated in option arms, neg am loans…However, have you sat behind the desk in a consumer lending branch? It’s all about numbers, numbers, numbers! Screw the person on the other end of the line! I was there for 14 months, trust me, I made plenty of bad loans! It was do it, or get out. I got out, and just in time! Thank God!…I can sleep at night.
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