Wells Fargo, one of the largest home lenders in the U.S., is stepping away from the market for home equity lines of credit because of uncertainty tied to the coronavirus pandemic.
The bank informed its mortgage personnel of the news Thursday in a conference call, according to a source, and the move was confirmed by company spokesman Tom Goyda.
“Wells Fargo Home Lending will temporarily stop accepting applications for all new home equity lines of credit after April 30,” Goyda said in an emailed statement. The choice “reflects careful consideration of current market conditions and the uncertainty around the timing and scope of the anticipated economic recovery.”
Banks have been retreating from loans tied to housing as the coronavirus pandemic impacts home values and the creditworthiness of borrowers. Earlier this month, JPMorgan Chase said it was dropping HELOCs and also tightened conditions in which it will make mortgages, requiring higher FICO scores and bigger down payments for new loans.
Wells Fargo, the fourth-biggest U.S. bank by assets, had taken similar steps this month to retrench from the market, shunning riskier loans including non-conforming mortgages. During tough economic times, HELOCs are riskier products for banks because in a foreclosure, the lender who made the primary mortgage is first in line to get paid in a recovery.
Still, the move will impact Wells Fargo customers who had been hoping to take out a line of credit based on the equity they had in their residences. That money could be used for a rainy day fund for people who have lost jobs or whose businesses have been shuttered amid the coronavirus closures.
The bank said the HELOC suspension will “continue until our analysis of market conditions indicates that it is appropriate to resume the responsible extension of HELOCs to homeowners,” Goyda said