Why Wells Fargo is still on top
According to all the analysts, the mortgage crisis is going to worsen before improving, and interestingly said clearly to the media by Wells Fargo Bank’s John Stumpf, CEO. Therefore it is no surprise that Wells Fargo Bank has set itself up to succeed through and after this crisis has ended. The main reason for this is by far experience and knowledge of the history of the Great Depression and the similarities that have occurred, sending shockwaves throughout the financial community, especially amongst the more experienced lenders like Wells Fargo Bank.
Subprime mortgages appear to be one of the main root causes of the decline and unlike many current lenders, whether banks or financing companies, Wells Fargo has read the history lines and seen this coming for some time. They have recognized that the decline in nationwide housing has never been so serious since the time of the Great Depression, something also recognized at a conference for bankers in New York City just recently. The main issue is that these types of mortgages have seen more defaults than has been seen in recent history. The warnings are all there and Wells Fargo Bank is battening down the hatches to ensure their own survival when others may not yet realize the dangers ahead.
This does not mean that Wells Fargo Bank’s stockholders are not concerned, or their many current borrowers who have mortgages with them. However, the country has been assured that the bank has positioned itself to ride the high waves that will follow. Also, they recognize that this year that loans made through home equity stand to default more than ever and many will lose their homes as a result.
From January through to September 2008, Wells Fargo Bank has authorized more than some two hundred billion dollars worth of home equity loans to people, the second largest amount in the country compared to the runner up, Countrywide Financial. Interestingly enough the impact of the equity home market is showing itself clearly as Countrywide has already cut some twelve thousand jobs and suffered a loss in the third part of 2007 of some one point two billion dollars. Can Countrywide survive? No one can be sure, but something is terribly wrong, and something that Wells Fargo Bank is hedging against.
According to Wells Fargo’s CEO, the bank has maintained its stability despite the rocky climate by keeping to its original lending type policies. Unlike a lot of other lenders and banks, they have avoided all the unusual types of mortgages, including loans that involve interest only, one hundred percent or more mortgages and loans where interest rates can be adjusted to let the borrowers pay a lot less than the original principal amount that should be due.
Even foreclosures on home reach incredibly high levels last year, reaching a record high, and even Wells Fargo Bank is worrying about this as this could affect them in the weeks, months and years ahead. As the market is showing, the weakening in the sales of homes and the new construction that is going on are falling steadily. This will continue to make the house prices high and increase the level of decline if it continues, making it harder for current owners to cover their mortgages and new buyers to find anything at all. Therefore it seems obvious that Wells Fargo Bank will be more cautious to whom they lend and maintain their policies to protect their existing loans and any new ones to ride the storm out, but their chances of success after the crisis is over is not guaranteed, but definitely better than others within the mortgage lending industry.
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