UPDATE 2-Wells Fargo: Over 200 markets face housing trouble
(Adds Wells Fargo comment, paragraph 8)
NEW YORK, Feb 27 (Reuters) - Wells Fargo & Co (WFC.N), the second-largest U.S. provider of home loans, has identified more than 200 troubled housing markets nationwide, showing how the mortgage crisis has spread beyond a few select U.S. regions.
In a February 25 document sent to mortgage brokers, San Francisco-based Wells Fargo said it had identified "soft," "distressed" or "severely distressed" housing markets in 24 states and Washington, D.C. Most of the markets are counties, while a handful are cities.
Wells Fargo is tightening its lending standards in the affected markets on February 29, often by limiting the size of loans as a percentage of home values, regardless of borrowers' ability to pay. In some markets, it will not allow purchasers to borrow more than 75 percent of the value of their homes.
The fifth-largest U.S. bank is a more conservative lender than many rivals, but took a $1.4 billion, fourth-quarter charge to add reserves, largely for home equity loans.
Its assessment reflects how the housing slump is no longer concentrated among just high-risk borrowers with subprime or below-prime "Alt-A" home loans, and in markets such as Arizona, California, Florida and the upper Midwest.
"You're seeing a natural reaction to fundamental trends," said Christopher Thornberg, principal and founding partner of Beacon Economics in Los Angeles. "There are three main drivers to foreclosures: people borrowing more than they can afford, rising unemployment and falling home prices. The latter issues affect a wide range of loans, not just subprime and Alt-A."
Wells Fargo confirmed the document's contents.
Kathleen Vaughan, an executive vice president at Wells Fargo Wholesale Lending, said: "We're making day-to-day decisions on products and channels that are consistent with the needs of our customers, with appropriate returns and risks, and with our long-term, prudent, business practices."
GREAT DEPRESSION
In the document, Wells Fargo said California has at least 33 housing markets "at risk," and that at least 20 counties, including Los Angeles and San Diego, face severe distress.
Florida also has 33 at-risk markets, followed by Michigan and Virginia with 15 each, and Maryland and Ohio with 13 each, Wells Fargo said.
Other at-risk markets are located in Arizona, Colorado, Connecticut, the District of Columbia, Illinois, Louisiana, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, Wisconsin and West Virginia, Wells Fargo said.
Wells Fargo last year cut several hundred mortgage jobs and shut a subprime mortgage business for brokers.
Lenders nationwide are also cutting back because there is little demand from investors for many of the complex securities into which Wall Street once packaged many home loans. Continued...
