Skip to main content
Advertising

Originally published Saturday, June 7, 2014 at 9:00 PM

  • Share:
             
  • Comments (0)
  • Print

Wells Fargo ends interest-only home-equity loans

New borrowers must repay Wells Fargo some principal along with the periodic interest instead of waiting until future years.


Bloomberg News

advertising

Wells Fargo, the biggest U.S. residential lender, has stopped offering most customers the interest-only version of its home-equity line of credit.

New borrowers must repay some principal along with the periodic interest instead of waiting until future years, said Tom Goyda, a Wells Fargo spokesman. Customers of the San Francisco-based bank can still get the interest-only option if they have “significant assets” and demonstrate the ability to handle a bigger bill when principal becomes payable, Goyda said.

Wells Fargo first made the change in November, according to Goyda. The revision was reported June 2 by The Wall Street Journal.

Banks have ratcheted up borrowing requirements after defaults soared during the credit crisis, leading to the most severe drop in home prices since the Great Depression. Regulators and analysts have expressed concern that borrowers could face payment shock when their monthly bills rise for existing home-equity loans made before the bust.

Wells Fargo made the change to head off such shocks again, according to Brad Blackwell, who oversees portfolio lending. Tighter U.S. regulations on first mortgages may prompt some rivals to offer more interest-only lines of credit to customers who don’t qualify for a regular loan, Blackwell said.

“We don’t think it’s a good product design,” Blackwell said. Requiring customers to pay part of the principal is “a more responsible product,” he said.

Wells Fargo’s home-equity portfolio totaled $82 billion in the first quarter, the company said.

The bulk of New York-based JPMorgan Chase’s home-equity products are interest-only and “we continuously review repayment options for our home-equity product, including principal payments,” said Amy Bonitatibus, a spokeswoman for the biggest U.S. bank by assets.

Bank of America, ranked second by assets, is “considering an amortizing payment structure based on customer feedback,” said Terry Francisco, a spokesman for the Charlotte, N.C.-based lender.

While No. 3 Citigroup continuously reviews its offers, the bank has no plans to change its interest-only home-equity credit products, said Mark Rodgers, a spokesman for the New York-based company.



Want unlimited access to seattletimes.com? Subscribe now!

Also in Business & Technology

News where, when and how you want it

Email Icon

Bake cookies for a cause

Bake cookies for a cause

Get 23 scrumptious recipes in our "Quintessential Cookies" e-book. One dollar of your $3.95 purchase goes to Fund For The Needy.

Advertising

Advertising


Advertising
The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited seattletimes.com access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited seattletimes.com content access is included with most subscriptions.

Activate Subscriber Account ►