Wells Fargo has halted most interest-only loans

  • Updated: June 3, 2014 - 10:40 AM
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The nation's biggest residential lender -- and operator of Minnesota's largest bank -- has stopped offering interest-only home loans.

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Wells Fargo & Co., 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, Tom Goyda, a Wells Fargo spokesman, said Monday. Customers of the San Francisco-based bank can still get the interest-only option if they have “significant assets” and demonstrate 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 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 that were 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.

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