Wells Fargo launches 3% down payment mortgage

Wells Fargo & Co. is rolling out a new mortgage for borrowers making minimal down payments, an offering that could allow the bank to step back significantly from a controversial Federal Housing Administration program.

The move comes as most of the country’s main banks exit from any substantial role making loans guaranteed by the FHA. The agency insures mortgages made to buyers who would otherwise have a hard time getting loans, but it has been shunned by banks following a wave of lawsuits by the Justice Department that alleged poor underwriting.

Wells Fargo, which made $6.3 billion in FHA-backed loans last year, is the only mainstream bank in the FHA’s top 20 originators, according to trade publication Inside Mortgage Finance.

The bank’s new mortgage allows borrowerswith credit scoresas low as 620 on a scale of 300 to 850to make down payments of as little as 3%, while also allowing them to use income from family members or renters to qualify. The requirements don’t represent a significant expansion of mortgage access, but will allow Wells Fargo to make more loans to low- and middle-income borrowers without going through theFHA.

The bank’s new program, which was launched through a partnership with mortgage-finance giant Fannie Mae, could replace about of half the bank’s current FHA volume and increase its market share, a person familiar with the matter said.




Wells Fargo to Launch Faster Loan to Fight Online Rivals

The Wells Fargo loan, dubbed FastFlex, ranges from $10,000 to $35,000. It is funded as soon as the next business day, days or weeks faster than other Wells Fargo loan offerings, with a weekly repayment schedule. It represents a test of whether the bank can develop its own technology to compete with Silicon Valley firms, which often chide traditional lenders for being slow-moving and unwilling to innovate.