Wells Fargo to expand GSE-free mortgage lending

Well it’s been a long time coming, but it appears that the banking world, at least those at the helm of Wells Fargo, believe the worst is behind us and the downside is very minimal. Why do I say this? Wells Fargo is expanding their lending division to fund loans that DO NOT meet FNMA and FHLMC guidelines. For the last 5 years FNMA, FHLMC and FHA, have been the only source of financiong for real estate transactions. Last week they came out with the announcement that they are expanding into mortgage lending that will not be tied to those entities guidelines.

This is a huge move in the lending world. Someone had to make the first move. Soon there will be another enitity, or company to be created to offer additional sources of mortgage financing. It may be Wilbur Ross, John Paulson or any other conglomerate of wealthy individuals that know the mortgage space that may follow down the same path that is being blazed by Wells Fargo. It has been much needed and will create a floor under real estate prices and possibly create that initial snap back we will have in real estate prices at some time.

Here’s the story:

Wells Fargo ($31.03 0%) finalized a new division built to originate mortgages outside of Fannie Mae and Freddie Mac guidelines.

The bank promoted Brad Blackwell, formerly a sales manager in charge of West Coast operations, to lead the new business. He will work with Wells Fargo community banks, wealth brokerages and retirement groups, and the non-agency, jumbo and home equity loans will be kept on the Wells portfolio.

Blackwell will report to Mike Heid, the president of the Wells mortgage department.

“The market has changed and we are adapting with it to add more horsepower to help homeowners and homebuyers succeed financially,” Blackwell said in a statement.

The government continues to finance 95% of the mortgage market after credit froze during the crisis in 2007.

A Wells spokeswoman said the non-agency loans could potentially securitized in private-label bonds in the future, but there are no plans to “at this point.” The bank did not project how many new loans the new division plans to write.

Greg Gwizdz, formerly an East Coast sales manager, will lead the national consumer lending team. It will continue its traditional retail lending business.

Wells remains the nation’s largest mortgage lender. It originated $357 billion in new mortgages in 2011 more than double the $157 billionBank of America ($8.04 0%) wrote as the next largest lender.

There’s still a lot of work to be done. While the mortgage arena will not, and should not be as loose and ridiculous as it was in the first half of the 2000’s, it does need more flexibility to serve some future homeowners (and existing homeowners) who have had difficulty conforming to every guideline in the GSE’s manual. This move by Wells Fargo and hopefully additional banks will allow more people to participate in purchasing and refinancing.  Its a great move in the right direction.