Mortgage Quote

NEW YORK, Feb 21 (Reuters) - Wells Fargo & Co. said on Wednesday it is cutting 320 subprime mortgage jobs in two operations centers because it is tightening its lending standards to home buyers with poor credit histories.

About 250 jobs are being eliminated in Fort Mill, South Carolina, and 70 in Concord, California, according to a memo from Lynn Greenwood, a senior vice president of communications for the No. 5 U.S. bank’s home and consumer finance group. Wells Fargo is the largest U.S. subprime mortgage lender,

“As a result of changing market conditions — such as moderating house price appreciation — effective Feb. 16 we tightened our credit policy for a portion of our nonprime lending business,” Greenwood wrote. “This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans.”

The cuts are the latest retrenchment in the subprime sector. Defaults are rising as flatter or falling home prices make it harder to refinance adjustable-rate mortgages whose rates reset higher.

San Francisco-based Wells Fargo said it will give consideration for affected workers who want to stay on.

Rising loan default rates among borrowers with spotty credit are hurting the U.S. subprime mortgage business, a published report said.
Defaults and related financial troubles affecting mortgage companies could hurt a broad segment of the U.S. housing market, The New York Times said Thursday.
Particularly hard hit will be largely poor and minority home buyers, who will see interest rates on adjustable-rate mortgages rise, as well as investors in mortgage-backed securities who poured billions into these loans, the report said.
Subprime lenders are particularly susceptible to the current housing-market downturn because they often deal with borrowers who stretch financially to buy homes. More than half of these borrowers, for instance, take out adjustable mortgages, whose interest rates are often lower than those of fixed-rate mortgages. But adjustable rates change, based on market conditions.
In addition, many subprime lenders are not obligated to follow the tougher regulations that apply to commercial banks.
The delinquency rate for loans made by subprime lender NovaStar Financial of Kansas City, Mo., jumped to 7 percent in 2006 from 2 percent in 2005, the company said.

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