Wells Fargo Foreclosure

Bair: 3% Down Payment Mortgage Comes with Risk

Wells Fargo, the nation’s largest mortgage lender, is targeting first-time home buyers and low- to moderate-income buyers who have been sidelined in the housing recovery. The bank is underwriting the borrowers and Fannie Mae is originating and selling the loans. Borrowers may take out a mortgage up to $417,000.

Bair said it appears that Wells Fargo isn’t taking much of a risk with its new program.

“Fannie Mae’s got it. Private mortgage insurers got it. They’re underwriting, but they’re passing it along,” she said.

“We saw during the crisis that when you separate the … credit decision to make the loan from who is actually holding the risk of the loan, you can run into some problems too. I’m not completely comfortable with it, but it is what it is.”

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