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Wells Fargo to Fund Mortgage Banks: Report

Wells may lay out as much as $4 billion to start a warehouse-lending unit, Bloomberg reports.

Wells Fargo


is hatching plans to provide funding to mortgage banks, which have been hit with a funding freeze amid the financial crisis, according to a news report Thursday.

Wells may lay out as much as $4 billion to start a warehouse-lending unit that would provide funds to cash-strapped mortgage banks,


reported. Earlier in the week, there was word that regulators were planning to allow

Fannie Mae



Freddie Mac



start lending to the industry.

Wells may be positioning itself to take advantage of a dearth of funding in a housing market that has started to show signs of life again. Low interest rates and falling home values have spurred homeowners to refinance and have enticed new homebuyers.

Mortgage banks are usually small companies that don't take deposits and rely on warehouse loans to issue new mortgages. They then resell those bundled loans to investors and the large banks that issue warehouse debt in the first place. However, as the credit markets froze up, mortgage banks have been hard-pressed to find funding.

Wells shares closed up 85 cents, or 5.9% to $15.33 amid a broad market rally led by the banking sector.