Wells Fargo Puts a Ceiling on Subprime Auto Loans | Emergency Preparedness | Forums

another bubble coming? Never even thought of this. All the peoples credit that was destroyed in the real estate sub prime fiasco still had to get financing for cars afterwards for cash for clunkers

Wells Fargo, one of the largest subprime car lenders, is pulling back from that roaring market, a move that is being felt throughout the broader auto industry.

The giant San Francisco bank, known for its stagecoach logo and its steady profits, has been at the center of the boom in making loans to people with tarnished credit scores. Wall Street, meanwhile, has been bundling and selling such loans as securities to investors, reaping big profits while allowing millions of financially troubled borrowers to buy cars.

But now, amid signs that the market is overheating, Wells Fargo has imposed a cap for the first time on the amount of loans it will extend to subprime borrowers.

The bank is limiting the dollar volume of its subprime auto originations to 10 percent of its overall auto loan originations, which last year totaled $29.9 billion, bank executives said.

The decision, detailed in interviews with top Wells Fargo executives, along with other large auto lenders, is a sobering moment for the booming market. Other lenders may decide to take their cue from Wells Fargo, one of the nation’s largest lenders. After successfully sidestepping many of the catastrophic mortgage losses that hit its competitors during the financial crisis, the bank has developed a reputation for deftly managing risk.

http://www.nytimes.c.....loans.html