Housing market lags behind recovery, Wells Fargo CEO says
September 18, 2014 | By Sean Lyngaas | email@example.com
The current economic recovery is the only one since World War II that has not been led by an improving housing market, Wells Fargo CEO John Stumpf told a Club luncheon Sept. 17.
Speaking just over six years to the day that Lehman Brothers closed its doors, triggering the Great Recession, Stumpf said that student debt and the limited availability of credit partly explain why housing has failed to lead the recovery.
“Credit’s not available for every borrower who wants to buy a house, who can afford a house and who wants to make that decision a commitment,” he said.
He said mortgage firms can deny insurance on loans on technical grounds, while banks and other originators of loans set minimum credit scores for would-be borrowers. Many people are left without a loan as a result, he said.
“So there’s a certain part of the market that can’t get a conforming mortgage because we know in this group there’s going to be more default,” Stumpf said. One way of addressing the problem is to find a balance between when a loan originator is responsible for a
default loan and when a consumer is responsible, he said.
Wells Fargo, America’s largest mortgage lender, has had its own problems in the housing market. In 2012, the bank agreed to pay $175 million after the Justice Department charged that senior officials knew that independent brokers were disproportionately steering blacks and Hispanics to higher-cost loans and charging them higher fees to get mortgages. The alleged discrimination took place between 2004 and 2009.
Stumpf said his main takeaway from the Great Recession: “There should be no company too big to fail in any industry, surely not financial services. Failure is an important part
of the free enterprise system.”