By KIMBERLEY HAAS
Leaders at Wells Fargo announced this week that they are reducing their home lending footprint and some people are saying it may be big news in the lending space, but will likely not make much of a difference to the average consumer.
It was announced Tuesday that the company, formerly the nation’s largest mortgage lender, is exiting the correspondent lending channel and shrinking its mortgage servicing portfolio.
Plans are to focus on serving bank customers and members of minority communities.
Lawrence White, a professor of economics at the New York University Leonard N. Stern School of Business, sat down with the Mortgage Note to talk about the news on Wednesday.
White said he hopes the move by leaders at Wells Fargo signals a change after some turbulent times. The bank has been under fire for setting up fake accounts; mismanaging mortgages, auto loans, and deposit accounts; and allegedly discriminating against Black customers.
“Things really smell there,” White said, adding that the institution may be too big to manage.
White said because mortgage lending has changed so much in the past few decades, consumers are not likely to see a significant impact as a result of the changes. Rocket Mortgage, United Shore Financial, and loanDepot have grown to become significant leaders in the industry, he said.
“I don’t see the cutback as making a big change in how the mortgage market is going to look,” White said. “Grass will not grow in the streets of America.”
White pointed out that current interest rates, which remain well above 6% for a 30-year fixed mortgage, have a much bigger impact on the average consumer.
“This feels like second order. It’s much less important,” White said of the announcement by Wells Fargo.
Mike Fawaz, executive vice president of Rocket Pro TPO, said the move by Wells Fargo will not have much of an effect on the broker community or wholesale business.
“When you think about Wells Fargo and you think about the wholesale business, Wells Fargo wasn’t doing anything when it comes to non-delegated product or even wholesale lending so really it doesn’t have much of an effect on the broker community or the wholesale business,” Fawaz said.
“They weren’t a player in this space. They haven’t been a player in this space for a while, so really when you think about it, it really doesn’t play a major role in the wholesale business.”
Scott Olson, executive director of Community Home Lenders Association, said in a statement that members of his organization are concerned about the announcement.
The association is a national organization that represents independent mortgage bankers.
“CHLA is deeply disappointed that Wells Fargo is pulling out of the correspondent loan business – pulling out of buying even government agency loans with little or no risk,” Olson said.
“This action makes it all the more imperative that federal agency mortgage programs – FHA, Ginnie Mae, Fannie Mae, and Freddie Mac – don’t pull in at the same time on authority for direct lending access for IMBs, which is critical to maintaining access to credit for underserved and other borrowers.”
Olson said Wells Fargo pulling out of corresponding lending increases the importance of maintaining direct access to sell to Fannie Mae and Freddie Mac and to issue Ginnie Mae securities for FHA loans.
Olson said IMBs now originate over two-thirds of all loans, over 90% of FHA loans, and over 70% of Fannie Mae and Freddie Mac loans.
Leaders at Wells Fargo plan to announce their fourth quarter 2022 earnings on Friday at 7 a.m. The results will be available online.
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