New Orleans In the depths of the Great Recession it is still shocking to see how oblivious and irresponsible Wells Fargo manages to be every time we turn our heads they seem to be competing with Bank of America for which bank has been most irresponsible in this mess.  Now we see that part of their plan for the future of home ownership is that working families should be renters so that homes are only owned by the upper middle class and beyond.  According to today’s Wall Street Journal, Wells Fargo is campaigning for a federal regulation that would mandate a 30% down payment as the new Dodd-Frank standard for private mortgages without risk retention.

In their “defense” the article quotes Wells Fargo, which is currently originating 25% of new mortgages nationally, saying essentially, “hey what’s the problem?” because they are currently writing 50% of their mortgages with 30% down payments.  My point exactly!  Wells Fargo clearly only wants half of these customers to really own homes.

What is really at stake is what the bill refers to as “risk retention,” which is a needed hedge against the increasingly blind securitization pools of mortgages.  Below a certain standard, 30% for Wells and less for many others, the bank would have to retain 5% of the mortgage as part of their own portfolio forcing them to stop simply passing on all risk for the loans after collecting their “$200 at go.”

For the next generation of wannabe homeowners the only way to avoid the squeeze would be a mortgage through the Federal Housing Administration (FHA) where down payments can be as low as 3.5%.  Reportedly some other banking institutions are taking the position that if Wells Fargo’s position was to prevail too many mortgages and therefore too much risk will move to the government from the private sector.

Frankly, I’m OK with that, especially since the evidence from the bailouts is that the real risk ends up with the government anyway.  If we eliminated the blanket interest rate deduction, the government could afford a much great role in housing for homeowners, renters, and others.  But, since politically my position is unlikely to succeed currently, then Wells Fargo is wrong and we need more folks writing mortgages for working families, too, not just the better to do.

We need a real housing policy in America!