Bad Loan Officer Collateral Damage

There’s a bad game being played right now. It’s certainly not new, but it’s picked up a new energy. It’s called the Blame Game and the spinner is pointed at you, the Originator!

The blame is coming from all points on the compass. The Politicians, the Homeowners and even the Lenders themselves. Most insiders know that the blame isn’t one person’s alone. I wrote a piece, “Conspirator or Patsy?” almost a year ago spreading the blame on virtually everyone – including the homeowner themselves. I’ve always contended that we have to change more than the guidelines and rules, we have to change an entire borrowing culture.

We can get into our own version of the blame game later. For now I want to highlight Wells Fargo and their latest move on the game board of Life. I personally like WFC. They seem to have always subscribed to sounder standards than most other Lenders.

Just a month ago, they announced a $490 million charge in losses for the third quarter.

…attributing a good chunk of it to the increase in home equity loan losses.

Tuesday, the headlines reported “WFC is absorbing $1.4 billion in losses on home equity loans”. That’s a big jump from Q3. Reading a little deeper:

Wells Fargo intends to liquidate $11.9 billion in home equity loans that have been flagged as major problems. The bank said most of the delinquent loans originated from mortgage brokers or other lenders on the wholesale market and are concentrated in areas experiencing the sharpest declines in home values.

Business is business. While it may be argued that much of any large lender’s past success can in part be credited to it’s wholesale channels and the Mortgage Brokers, it’s now also being seen as the largest source of loss.

That day, Nov. 26th, in conjunction with the 1.4 billion write down, WFC ceased allowing brokers to originate almost all of their seconds. Almost at the same time I received an email from one of my favorite wholesale reps.

Effective immediately, I’m sad to inform you that my role as a Home Equity Account Executive with Wells Fargo has been eliminated.

So Christy lost her job, I lost the ability to broker a HELOC, and Wells Fargo lost 1.4 billion.

Who’s really to blame? Is it the really all the mortgage broker’s fault?