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Announcement:

Moody's affirms Wells Fargo Home Lending's prime jumbo originator assessment as Strong

06 Mar 2019

New York, March 06, 2019 -- Moody's Investors Service affirmed Wells Fargo Home Lending's (WFHL) prime jumbo residential mortgage originator assessment as Strong.

Our assessment is based on Strong collateral performance of WFHL's prime jumbo residential mortgage loans (Loan Performance), Strong lending practices for prime jumbo residential mortgage loans (Ability) and Strong operational stability (Stability).

WFHL originated approximately 365,000 prime jumbo residential mortgage loans during the 78 month period ending 30 June 2018. For the first half of 2018, approximately 84% were sourced from the retail channel and 16% from WFHL's correspondent channel.

ASSESSMENT RATIONALE

Headquartered in Des Moines, IA, Wells Fargo Home Lending (WFHL) is one of the largest residential mortgage originators in the U.S. Mortgage originations is a core component of Wells Fargo & Company's diversified range of financial services. As of 30 September 2018, Wells Fargo & Company had total assets of $1.9 trillion, net income of $16.7 billion (year-to-date). WFHL employs over 28,000 employees in mortgage production.

WFHL's three strongest features include early loan performance, underwriting and credit risk management.

We assess WFHL's early loan performance for its prime jumbo residential mortgage program as Strong due to very low delinquencies, repurchases and early payment defaults. Only 250 (0.10%) of the 250,000+ jumbo loans funded since 2011 have ever been 60+ days past due.

We assess WFHL's underwriting practices for prime jumbo as Strong due to its clear, well written underwriting guidelines, closely monitored exception process and conservative policies and procedures. Additionally, a proprietary risk scoring model is embedded in the retail underwriting system which provides an objective and consistent measurement of credit worthiness. The model supports policy overlays and requires documentation per credit policy guidelines. All prime jumbo loans are underwritten with the assumption that they will be held in Wells Fargo's portfolio.

We assess WFHL's credit risk management as Strong because of strong credit risk management oversight, multiple specialized risk teams embedded within the business to monitor risk and its detailed risk analyses and feedback processes. In addition, historical risk analysis is used to project volume and performance expectations under three scenarios: pre-crisis, crisis and post-crisis. The crisis period is used to demonstrate performance under a stress scenario. Populations are stratified by multiple factors including LTV, DTI, FICO, business channel and loan attributes.

WFHL's challenge is its negative outlook on financial stability.

Wells Fargo Bank N.A. has a Moody's long term bank deposit rating of Aa1 on negative outlook. Our outlook has been negative since February 2018 when the Federal Reserve imposed an asset cap on its parent company Wells Fargo & Company as part of a broad consent order focused on its governance and risk management shortcomings.

The methodology used in this analysis was "Originator Assessments for Residential Mortgage Loans" published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Lima Ekram
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

William Fricke
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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