They’re back: Wells Fargo prepares to issue private-label mortgage bonds

First non-government bonds since the housing crisis

Wells Fargo is planning its reentrance into the private mortgage-backed security market for the first time since the financial crisis, a head of the bank’s consumer lending division announced, according to an article by Dan Freed for Reuters.

“There's been many, many years since Wells Fargo has participated in any kind of private label market,” Franklin Codel told investors. We are trying to “see what we can do there to help bring confidence back.”

Before the financial crisis, Wells Fargo packaged over $1 trillion of mortgages into private label securitizations, however since the crisis, investors lost interest as large volumes of risky loans went bad, the article states. Indeed, this chart from secondary trade group sifma shows that before the housing crisis, the non-agency RMBS market pulled in nearly $1.3 trillion in 2006.

The current market is only a shadow of that volume as governent-linked entities, Ginnie Mae, Freddie Mac and Fannie Mae now securitize the vast majority of this nation's mortgages. Standard & Poor's predicts the private MBS market in 2017 will reach up to $50 billion.

The announcement from Wells Fargo will help reach that target.

From the Reuters article:

"This year one of our aspirations is to come back to the market with a couple of deals and we're taking a look at making sure we can structure those properly … to try to test the market and see what we can do there to help bring confidence back," Codel said.

But the bank hasn’t always had the best luck with mortgage-backed securities, even beyond its large amounts of subprime loans that sunk during the crisis. Back in November 2013, HousingWire reported Wells Fargo paid out $335 million to the Federal Housing Finance Agency for MBS misrepresentations.

Photo Credit: Jose Antonio Perez /

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