With new rules defining Qualified Mortgages (QM) slated
to kick in on Friday at least two lenders have indicated they will make room
for loans that don't quite fit the government mandated mold. The two, Wells Fargo and Bank of the West,
plan to write at least some of the loans, retaining them for their own portfolios.
Bank of the West, headquartered in Omaha says it
will continue to offer interest only loans to its customers even though the
loans fall outside the guidelines established by the Consumer Financial
Protection Bureau. Paul Wible, Senior
Executive Vice President and Head of the bank's National Finance Group said in a
statement this week, "We extensively reviewed the CFPB's rules and found
them broadly consistent with how Bank of the West has always done business. At
the same time, we know that interest-only loans can fulfill the mortgage needs
of many of our customers. Therefore, even though they do not fit the CFPB's
definition of a QM, we will continue to offer them as before."
Wible said that the bank's analysis confirmed its
belief that a well-underwritten, interest only loan could be good for its
customers and safe for the bank to hold on its balance sheet. These loans, he said, meet the needs of
certain customers such as the self-employed and that the bank will continue to
require that such borrowers meet its prudent underwriting criteria.
Bank of the West, a subsidiary of BNP Paribas, has
assets of $65 billion and operates 600 retail and commercial banking locations
in 19 states.
On a much larger scale, Wells Fargo, the country's
largest home lender is reported to be readying a group to handle nothing but portfolio
loans. Bloomberg says the bank has created "a swat team" of about 400
underwriters who will originate mortgages for the bank to hold. As many as 40 percent of the loans are
expected to be outside of new government guidelines.
said they were told by Brad Blackwell, head of portfolio lending at the bank
that the group will review loans that do not qualify for the safe harbor
protections of new CFPB rules as a way to increase lending without losing
control of quality.
'"We have separated the underwriting
group into a separate team that only underwrites loans" for the bank's own
balance sheet,' Blackwell told Bloomberg. '"We found it impossible to achieve our
objectives" with the two groups together, he said.'
bank's portfolio held $72.4 billion in non-conforming mortgages at the end of
the third quarter, 14.5 billion of which Wells Fargo added in the second and
third quarters of 2013.