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Post by jeffolie on Jul 23, 2007 15:07:22 GMT -6
65% of new subprime mortgages stopped Wells Fargo Pulls 2/28 Subprime Loans From Reuters: Wells Fargo pulls popular subprime loan from mix. Wells Fargo & Co. ... on Monday said it stopped offering a popular subprime mortgage product in response to market and regulatory pressure. The company in an e-mail said it ended on Friday retail offerings of so-called 2/28 loans, which at 65 percent of all subprime mortgages last year are the staple of the industry. ... Other big lenders including Countrywide Financial Corp., Washington Mutual Inc., Merrill Lynch & Co.'s First Franklin and H&R Block Inc.'s Option One Mortgage have also said they would stop making 2/28s. biz.yahoo.com/rb/070723/wellsfargo_mortgages_subprime.html?.v=3
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Post by unlawflcombatnt on Jul 23, 2007 18:22:03 GMT -6
More from the article: " The median cost to buy credit default swap (CDS) insurance on Wells Fargo subprime bonds has risen to $865,000 from about $275,000 at the end of May. That cost covers each $10 million in face value of the bonds, which are rated Baa3, and ranks CDS on the bank's bonds the third cheapest among 35 issuers followed by Deutsche Bank AG.
Similar insurance for Countrywide subprime bonds has risen to $1 million from about $410,000.
The demise of 2/28s at lenders also follows "guidance" from the Federal Reserve and four other regulators that urges banks to qualify borrowers based on the highest rate the loan could incur after it resets, instead of the lower, initial rate. By using only the lower rate, it was easier for home buyers to qualify.
Wells Fargo's retail or third-party lenders have also discontinued one-year ARMs and some 40/30 ARMs.
Wells Fargo this month said its second-quarter profit rose 9 percent to a record, as higher customer fees offset a decline in mortgage banking income and a jump in loan losses...." Wells Fargo's profit "increase" of 9% is interesting, considering their stock prices have declined since the beginning of the year, from over 36.0, to 34.85 today.
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