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| Wachovia Corp. has made changes to its residential underwriting guidelines that will impact asset and employment verifications, loan-to-values and minimum credit scores on portfolio loans. Weak real estate markets will be affected the most.
The changes impact the Charlotte, N.C.-based company’s portfolio loan underwriting guidelines, spokesman Don Vecchiarello told MortgageDaily.com. The updates are effective April 26 for retail and wholesale originations. The moves were driven by challenging mortgage market conditions during the past 12 months. “We’ve seen foreclosures increase; we’ve seen numerous mortgage lenders go out of business, we’ve seen that the secondary market has been significantly impacted by decreasing liquidity, and I think — most importantly — we’ve seen residential real estate values have begun to deteriorate over this time,” Vecchiarello said in a telephone interview. “In some markets, I think we’ve seen home values decline as much as 20 to 25 percent.” Wachovia, which reported $87.4 billion in 2007 originations, is introducing market risk levels, he said. Local real estate markets will be categorized as either stable, watch or stressed. The basis for determining in which category a particular market fits in will be a home pricing index, inventory levels and absorption rate. Borrowers in stressed markets will be subject to newly adjusted LTVs and combined LTVs, while borrowers in watch markets will be limited to LTVs that fall somewhere in between stable and stressed markets. Wachovia will also implement a minimum qualifying FICO score, he continued. The company did not necessarily require a minimum FICO score up to now, and he could not specify what the minimum scores will be — though they will vary by market and be higher in stressed markets. “We’re not just all of a sudden substituting FICO scores for underwriting,” the spokesman stated, noting that the FICO score requirement will just complement the “full-fledged old-school underwriting process” the company has traditionally used. One other new requirement will be the verification of assets and employment — which was only done on a case-by-case basis in the past. “We’re going to continue to offer our full suite of marketable and conforming products throughout the nation, and our portfolio product line is still available to qualified borrowers with acceptable real estate collateral,” Vecchiarello said. “We’re making sure that we do these things so that we are very well positioned when the market begins to turn.” |
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Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com. e-mail:Â mtgsam@aol.com |
