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Wells: More Liquidity Issues in the Secondary Market

by Morgan on April 26, 2008

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From a recent Wells Fargo email to brokers submitted to us from friendly Blown Mortgage commenter vicatibm:

If you have any Loan in our system that is floating and not locked, you may want to consider locking it today to protect your commission.

We are hearing of illiquidity in the secondary mortgage market, so there may be a new price adjuster of up to 3.00% coming on Monday to any loan locked after the implementation of a Credit Policy-related retraction or change, regardless of the status of your loan at the time of lock.

Basically, we have loans in the pipeline that are in some form of approval or may even have a commitment BUT are not locked. A new price adjuster may be applied if a loan is not locked prior to the effective date of a policy change which eliminates or retracts a product, program or parameter. For committed loans, the adjuster will be added when the loan is locked.

We do not know what changes may be coming, and we do not know what products or LTV?s will be affected until it is too late to protect your commissions.

I know we talk a lot about pull through, but if you have a deal in our system and you?re waiting to get to docs before locking for a better price, you may want to lock today for 30 days and save your deal.

A couple of things: 1) the liquidity issues have not gone away. Even with the Fed pumping cash in to the system we’re still seeing the secondary market continuing to lock up as cash becomes scarce. 2) I love how the emphasis is on “protecting your commission” – AE’s know the way to a broker’s heart.

Let’s see what Wells does on Monday as far as guidelines revisions – it could set the direction for the rest of the banking community. I have one guess – the guidelines will be much tighter.

Last 3 posts by Morgan

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  • JD
    This is just an AE trying to get his/her brokers to lock and close.

    The announcement from Wells was only to protect themselves, because prior to this change, they had been allowing loans in the pipe to close under and old guidelines (locked or floating) until either; 1. the lock expied, or 2. if floating, the docs expired.

    They are merely changing their policy and letting everyone know that going forward, this policy will no longer be followed. Simply put, if you have a loan in the pipe that was submitted prior to a guideline change and it's not locked, when you lock it, there will be an adjustor (fee) for allowing the loan to close under the old guidelines.

    I'll be that if they find out who this AE is, he/she gets fired or seriously reprimanded; as e-mails like this are NEVER company sanctioned.

    Sure, things may tighten up; but I doubt this change was set because of some impending huge change. Rather, it was a company tired of losing money to keep lousy brokers happy.
  • I imagine it's somewhere in between. We're at the end of a month so maybe
    the AE's pull-through looks like garbage and is trying to improve the
    submitted/lock ratio of their pipeline; but further tightening is a very
    reasonable possibility too. I doubt the accuracy of the pricing adjuster -
    but I wouldn't be surprised if more LTV, FICO and product restrictions are
    announced next week.
  • JD
    Actually, the announcement on the pricing adjusters is true. I just think the this article about one AE is a little far reaching.
  • I would disagree - I think the actions of the people on the street are of
    far more interest (and usually a much better indicator of the truth) than
    the corporate pronouncements coming from the CEO or the PR department.
  • JD
    My point was that this article makes it sound like Wells is announcing this. They are not, one AE is. They are trouncing on the company
  • fair point & i agree w/you.
  • hh
    You mean brokers and the AE's who serve them make money and they are concerned about each others welfare?? Next you will tell me the fed chairman. real estate agents and worse of all the CEO's of these gigantic financial concerns make money for what they do too ! B of A wrote off $7 Billion and still made a profit and you are concerned with the pay of a broker? Have you looked at Joe Publics Visa or Mastercard lately? Major financial institutions are raping the public of its funds at a clip that makes hard money look like a gift.
  • JD
    Oh, come on. What difference does that make? That was not the topic of the article, nor was it the topic of my reply.

    If you are so concerned, then start your own non-profit bank or run for office instead of making stupid comments. At least stay on topic.
  • Tobby
    Wells is being up front with what it sees coming down the pike in the next few weeks. All the lenders will be affected by the same conditions. M/I companies will likely cut back (May 1?) and FNMA/FHLMC have been slowly tightening the warrants and restrictions on their product lines. Add to this the liquidity issues and rising rates, and you can see why the memo was a friendly "heads up" to brokers. Note: I rearely deal with Wells, but other lenders are saying the same thing informally.
  • CH
    Go to: www.14keys.com is the answers to your problems in life.
  • JD
    LOL...and people say that the people in the mortgage industry are scam artists.
  • April 30 is a big cut off point in terms of a lot of new guidelines out there. But they were all, at least in our case, communicated well in advance. I've got two deals closing this Monday and Tuesday that if I didn't get them done by then, they won't get done because of tightening guidelines.

    Welcome to the new reality. Either deal with it or get into another line of work.

    And I mean that in a nice, constructive criticism kind of way, not a snotty way.
  • JD
    You are correct, and as an industry; we need this throw back to reality and more sound lending practices.
  • I agree that tighter lending standards are better for us all - industry,
    homeowners, economy, taxpayers, etc.
  • But, like going through necessary surgery, it's good for you, but it isn't without pain.
  • Tobby
    Looks like Wells struck today the 28th. 3%!
  • well it's nice to not look like a total jack-ass! :)
  • JD
    No one said you were. My only comment was the fact that this particular AE was going a little farther than I'm sure corporate would want them too.

    I told you the information on the adjustor was correct. The internal e-mail was sent out last week notifying employees that it was coming. There were just no details.

    Since the changes are all different, spread out over many program changes, there's no way to say what the adjuster would be. Depending on the particulars of the loan and/or program change, the adjuster could be different. Also, they could change depending on the market.

    I think that it's a good thing, because the were letting files close under old parameters, possibly at a loss.
  • The comment wasn't directed at you JD - just occasionally I feel a little
    exposed and breathe a sigh of relief when the loops close - I appreciate
    your participation in this thread - it's made it far more valuable than the
    original article!
    Morgan
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