- Wells Fargo has begun laying off an undisclosed number of its home lending employees, little more than a week after reporting mortgage origination volume had dropped 33% year over year, the bank confirmed Friday to Business Insider and American Banker.
- “The home lending displacements this week are the result of cyclical changes in the broader home lending environment,” the bank told the publications in a statement. “We are committed to retaining as many employees as possible and will do everything we can to help them identify other opportunities within Wells Fargo.”
- Anonymous posts on the discussion board The Layoff indicate job cuts hit at least five markets — Phoenix; San Antonio; Minneapolis; Charlotte, North Carolina; and Des Moines, Iowa. "Processing, underwriting, and credit administration teams were notified 'their position would be eliminated because of the changing mortgage market,’” one commenter wrote. “They were given a 2 week notice.”
Wells Fargo did not specifically tease the prospect of layoffs in its earnings call this month, but CFO Mike Santomassimo said, “We've started to reduce expenses in response to the decline in volume and expect expenses will continue to decline throughout the year as excess capacity is removed and aligned to lower business activity.”
Santomassimo blamed a decrease in refinance activity — along with higher interest rates — for what he called the steepest quarterly decline in the mortgage arena since 2003. The average interest rates accompanying 30-year fixed mortgages have risen above 5% in recent weeks — a figure not seen since 2010, according to Business Insider.
“We still expect to have decent volumes in the purchase market, but our gain-on-sale margins will definitely be impacted, given that there’s still a lot of excess capacity in the system,” Santomassimo said, according to Inman.
Along with decreased volume, home lending is taking up a smaller share of Wells Fargo’s business. The bank saw $1.49 billion in first-quarter revenue from the silo, representing 17.4% of total revenue generated in Wells Fargo’s consumer banking and lending segment, Inman reported. That’s down from 21.1% during the previous quarter.
Wells Fargo CEO Charlie Scharf has been leading an effort, since at least 2020, to review the bank’s business model, cutting units that are seen as “non-core” and embarking on periodic but substantial rounds of job cuts. However, he indicated the interest rate increase may be a net positive for the bank.
“We’re going to make much more on the increase in rates than we will on the decline in mortgage banking income,” Scharf said during this month’s earnings call, according to Inman. “We’re continuing to focus on reducing expenses.”
Wells Fargo is not the only mortgage specialist to initiate layoffs last week. Mortgage tech company Blend announced Tuesday it would cut 200 positions across the company, representing 10% of its total workforce. Better.com launched its third round of job cuts last week. The company reportedly has trimmed half of its workforce — or more — since December, according to Fast Company.
"We are carrying out displacements in a transparent and thoughtful manner and providing assistance, such as severance and career counseling,” Wells Fargo said in its statement Friday. “The employees affected by these changes have each been an essential part of our success.”
Wells Fargo originated $37.9 billion in mortgages during 2022’s first quarter, down 21% from three months earlier, and 27% from January through March of 2021, Inman reported.
Originations made by the bank’s retail branches, meanwhile, slumped 27% quarter-over-quarter and 28% year-over-year. Loans purchased from correspondent lenders dipped 10%, compared with the fourth quarter, and 24% from 2021’s first quarter, the publication reported. Wells Fargo’s mortgage servicing portfolio, however, grew to $9.75 billion, up 19% from December and 10% from March 2021.
A business slump is not the only issue the bank’s home lending unit is facing. Wells Fargo drew criticism last month after a Bloomberg analysis of federal mortgage data found the bank approved 47% of mortgage refinance applications from Black homeowners in 2020 but 72% from white borrowers. That gap narrowed to 21 percentage points in 2021.