Wells Fargo is looking to re-enter the subprime mortgage market by lowering its standards of acceptable credit scores for borrowers. According to a report by Reuters, the bank is interested in customers with credit scores as low as 600 that meet strict criteria and have reasonable explanations for low scores. Wells Fargo is only looking to lend to borrowers with weaker credit scores if the Federal Housing Administration backs the loans.
Rising mortgage rates have incentivized lenders to target more borrowers. U.S. lending is expected to drop 36% in 2014 according to the Mortgage Bankers Association, due in large part to a decline in refinancings. Subprime borrowers accounted for only 0.3% of new home loans in October 2013, compared to the February 2004 average of 29%.
The St. Louis dispatch reports that Bank of America cut 280 workers from the mortgage operations department of the St. Charles, Missouri office. The staff reductions continued from earlier in the week, when 450 workers from the bank's West coast offices were let go. A company spokeswoman attributed the lay offs to a shrinking volume of delinquent mortgage loans, noting that delinquent loans have dropped by a third, requiring less staff.