Wells Fargo & Co. is one of the largest mortgage lenders in the nation. The company plans to ease the rules on mortgages. One of the main rules that the company will adjust is to lower the credit score for mortgages that are eligible for government support. This is a clear indication that the standards related to mortgage-lending will ease. Franklin Codel asserts that the bank will purchase loans that have Federal Housing Administration backing with credit score of 600. The main aim of this adjustment is to increase the level of credit (Timiraos “Well Fargo Plans to ease Some Rules on Mortgages”). The Federal Housing Administration has set specific standards that will guide loans and credits.
A down payment of at least 3.5% for a minimum credit score of 580 and 10% for a maximum of 580 credit score. This policy will influence other potential lenders to follow suit and ease their conditions. The lenders will probably ease the standards of credit; this is based on the fact that the prices in the market have stabilized (Timiraos “Well Fargo Plans to ease Some Rules on Mortgages”). Credit loosening could be slow but the good thing is t is changing. Executives at Wells Fargo believe that the standards will ease due to the coming policies.
In my opinion, lowering of credit score is very important. This is because the most influential factor of mortgage rates is the credit score. When the cedi score is lowed by the Wells Fargo, it means that the interest rate on mortgages will reduce, and many people will go for credit. Mortgage is a larger loan and any ease on credit score will lead to the significant amount of money reduced. On the same note, when Wells Fargo eases its credit score other major players in the mortgages industry will have to readjust their rules regarding mortgages and credit score.
The assumptions of the changes carried out by Wells Fargo on mortgages and credit scores that the surrounding policies on defaulted loan repurchase will be clearer than ever. This will guarantee the ease standards to be modesty. In addition, the company will lower minimum credit score and assumes that many people will go for mortgages.
Timiraos, Nick. Well Fargo Plans to Ease some Rules on Mortgages. The Wall Street Journal, 2014