Wells Fargo will no longer accept home equity line of credit applications
A Wells Fargo logo is seen at the SIBOS Banking and Financial Conference in Toronto
Chris Helgren | Reuters
Wells fargo, one of the largest real estate lenders in the United States, is moving away from the home equity line of credit market due to uncertainty over the coronavirus pandemic.
The bank briefed its mortgage staff on the news Thursday on a conference call, according to a source, and the move was confirmed by company spokesman Tom Goyda.
“Wells Fargo Home Lending will temporarily stop accepting applications for all new home equity lines of credit after April 30,” Goyda said in an emailed statement. This choice “reflects a careful examination of current market conditions and the uncertainty surrounding the timing and extent of the expected economic recovery.”
Banks have pulled out of home loans as the coronavirus pandemic impacts home values and borrowers’ creditworthiness. Earlier this month, JPMorgan Chase said it was abandoning HELOCs and also tightened the terms under which it would make mortgages, demanding higher FICO scores and larger down payments for new loans.
Wells Fargo, America’s fourth-largest bank by assets, had taken similar steps this month to withdraw from the market, avoiding riskier loans, including non-conforming mortgages. During tough economic times, HELOCs are riskier products for banks because in the event of a foreclosure, the lender who took out the primary mortgage is the first to be paid in the event of a repossession.
Nonetheless, the move will have an impact on Wells Fargo customers who hoped to take out a line of credit based on the equity in their home. This money could be used for a rainy day fund for people who have lost their jobs or whose businesses have been closed due to coronavirus closures.
The bank said the HELOC suspension “will continue until our analysis of market conditions indicates it is appropriate to take the responsible extension of HELOCs back to owners,” Goyda said.