NEW YORK ( TheStreet) -- Wells Fargo & Company ( WFC) has tasked 400 underwriters to generate mortgage loans for the company to hold, and as much as 40% of those loans could lie outside of government guidelines that go into effect this week.
Bloomberg reports that Wells Fargo is training the underwriters in order to increase its lending while maintaining quality control, according to head of portfolio lending Brad Blackwell. He added that the team will review loans, including those with terms that [as paraphrased by Bloomberg] "preclude them from qualifying for protections provided by the Consumer Financial Protection Bureau, or CFPB, under new rules," as paraphrased
Congress formed the CFPB as part of the Dodd-Frank Act in 2010 in order to create the qualified mortgage rule. This came in response to the widespread blame on banks for helping cause the financial crisis in 2008 by issuing mortgages to people who could not afford them. The aforementioned government regulations offer legal protection to banks that qualify based on certain criteria, but also hold them to legal liabilities if their loans contain high fees or mandate total debt payments that surpass 43% of the borrower's income.
Wells Fargo handled approximately 20% of U.S. mortgages last year and has spearheaded a program for those clients who want more non-traditional loans, such as those that have interest-only payments. Banks are in the midst of their biggest revamping since the Great Depression, so such loans are likely to become more prominent as interest rates rise and, consequently, borrowing demand decreases.
As of 12:25 p.m. ET, the stock moved up 0.13% to $45.98 and Wells Fargo had hit a high of $46.18 for the day at approximately 10 a.m., but hit a low of $45.80 shortly after 11 a.m.
TheStreet Ratings team rates WELLS FARGO & CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate WELLS FARGO & CO (WFC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, expanding profit margins, good cash flow from operations and notable return on equity. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."