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The Wells Fargo move that has corporate America buzzing
Started:February 25th, 2014 (09:04 PM) by kbit Views / Replies:147 / 0
Last Reply:February 25th, 2014 (09:04 PM) Attachments:0

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The Wells Fargo move that has corporate America buzzing

Old February 25th, 2014, 09:04 PM   #1 (permalink)
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The Wells Fargo move that has corporate America buzzing

It’s worth pointing out that a Federal Reserve governor, Daniel Tarullo, went out of his way on Tuesday to threaten future “monetary policy action” in response to a “build-up of broad and sustained systemic risk.”

WASHINGTON (MarketWatch) — It’s not often you hear the C-suite taking time from touting their own results to buzz about a strategic decision made by another company.

Yet that was the case Tuesday. Executives from both Home Depot HD +0.15% and Realogy RLGY +0.91% publicly and repeatedly praised the decision by Wells Fargo to make Federal Housing Administration loans easier to get.

Specifically, Wells Fargo WFC +0.04% is lowering the FICO threshold for getting an FHA loan to 600 from 642.

Now, Wells Fargo is no bit player; they’re the largest home lender in the country.

And Home Depot and Realogy (the owner of Better Homes and Gardens, Century 21 and Coldwell Banker among others) are not disinterested parties; more housing leads to more transactions and more profits for both of these companies, unless, say, the market explodes so much that it comes crashing down and that won’t ever happen, um, ahem.

That’s not to say we’re back in the heady days of 2006 or 2007, or will be, as Wells Fargo implements the change. No less an authority than Robert Shiller says home prices will continue to rise this year (albeit at a less-aggressive pace). One key measure, the ratio of prices to rents , is moving higher but basically around the levels of the 2001 recession.

A key measure of bank’s willingness to lend, the Federal Reserve’s senior loan officer survey, still show a pretty tight environment for home loans even as other loans are being aggressively made. Even the Fed’s Tarullo, warning about signs of excess, allows that valuations for real estate remain “within historic norms.”

The new loans Wells Fargo is making do require documentation — lots of it, when the federal government is involved — unlike some of those NINJA loans of days past. Typically, they would be for people who, one would hope, are on the road to recovery from the 2008 financial crisis.

Wells Fargo in 2014 isn’t, it’s fair to say, Countrywide in 2006. And corporate CEOs are probably right to praise the direction the pendulum is moving.

Equally, it’s probably right that the Tarullos of the world keep a close eye on just how far that pendulum moves.

The Wells Fargo move that has corporate America buzzing - MarketWatch First Take - MarketWatch

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