PNC closes third-party home-equity loan program
Spokesman: ‘It makes sense for us to minimize risk’
Amid the mortgage meltdown, PNC Financial Services Group has stopped offering home-equity loans through third-party mortgage brokers.
The Pittsburgh company closed its PNC Bank Home Equity Partners program, which it launched in early 2006, to ‘‘fit with our moderate risk profile,‘‘ said spokesman Brian Goerke, who declined to elaborate. Only a small percentage of the company’s home loans include third-party brokers, he said.
‘‘It makes sense for us to minimize risk,” Goerke said. ‘‘PNC Bank continues to provide home equity loans through 1,100 retail branches ... our home equity portfolio is extremely good in terms of credit risk.”
PNC plans to close all brokered loans by Feb. 29. Goerke said he did not know exactly how many brokers will be affected, but said few loans, if any, have been issued through Maryland brokers since the company took over Mercantile branches earlier this year. No PNC jobs will be affected, he said.
PNC acquired 240 Mercantile Bank affiliates, including Farmers & Mechanics, for $6 billion in March. The acquisition included some 500,000 accounts in Maryland.
In 2005, PNC Bank and Wells Fargo Home Mortgage formed a joint venture in the Washington, D.C., area called PNC Mortgage LLC and the company will continue to issue loans through the partnership, Goerke said.
In a similar move, Wells Fargo, with a regional office in Frederick, closed its nonprime wholesale lending unit in Louisiana and Iowa in July, ceasing selling mortgages through brokers and offering subprime loans only directly to customers.
Wells Fargo posted $1.4 billion in losses in the fourth quarter due to home equity loans that were not repaid, according to its Nov. 27 filing with the U.S. Securities and Exchange Commission. For most of last year, the company had been faring better than most mortgage companies, weathering the mortgage meltdown with consistent growth in earnings as it invested less than others in mortgage-backed securities.
Wells Fargo reported a record $9.8 billion in revenue for the second quarter, up 19 percent from the first quarter and up 13 percent from the same quarter last year. Net income was a record $2.28 billion, an increase of 9 percent from the prior-year quarter.
PNC also noted negative news as housing and mortgage markets continued to weaken late last year. In its fourth quarter statement, PNC said it planned to set aside nearly twice a much as in the third quarter to cover bad loans. It anticipated writing down $1.5 billion on its commercial mortgage portfolio.