Wells Fargo Downsizing Mortgage Business As Pandemic High Wears Off


Wells Fargo leadership has laid off employees in a move that is being blamed on a dramatically smaller originations market.

In a statement to The Mortgage Note, Spokesperson Jennifer Langan said the latest Mortgage Bankers Association forecast has total originations for 2022 at $2.4T, down 40% year-over-year, with refinances down over 70%.

“The home lending displacements are the natural result of cyclical changes in the broader home lending environment, as has been acknowledged by most mortgage providers across the industry. Employees affected by these changes have each been an essential part of our success. We are carrying out displacements in a transparent and thoughtful manner and providing assistance, such as severance and career counseling,” Langan said.

Langan added they are committed to retaining as many employees as possible and have had good success identifying opportunities and transferring them into other roles within Wells Fargo.

The company, which once churned out one in every three home loans in the United States, reported originating at $205 billion in 2021.

They funded more than 193,000 purchase loans and refinanced over 392,000 mortgages.

In 2020, Wells Fargo leadership reported financing 265,000 home purchases and refinancing 370,000 mortgages. Loan volume was at $223 billion.

CEO Charlie Scharf told analysts on a conference call last month that they are not interested in being large in the mortgage business for the sake of it and they are in the home-lending business for their customers.

What’s going on behind the scenes?

A critical examination of Wells Fargo and its business practices is underway.

Nearly three years ago, Scharf was appointed CEO to address a number of issues that started with the discovery that the bank had established millions of client accounts without authorization.

The misdeeds incensed the public, put the company in the sights of Capitol Hill, and precipitated a slew of regulatory punishments, including a size limit placed on the corporation by the Fed. 

At the same time, Wells Fargo is dealing with another scandal concerning the bank’s approval rate disparity for homeowners of color who hurried to reduce their interest payments during the Covid-19 outbreak.

A Bloomberg News analysis published on March 11 showed that 47% of Black homeowners who submitted refinance applications in 2020 were approved, compared to 72% of white homeowners.

Wells Fargo responded that all prospective borrowers are treated equally regardless of race or ethnicity. An internal assessment of 2020 refinancing choices revealed that “other, valid, credit-related reasons” were to blame for the discrepancies. 

Earlier this month, Gabrielle Saulsbery at Banking Dive reported the company will commission a third-party racial equity audit to examine ties to diverse communities and support of diversity in its workforce.

Reports of sham job interviews for Black and female candidates at Wells Fargo have also rocked their public image.

According to former executive Joe Bruno, company leaders at Wells Fargo allegedly put minority candidates through the interview process for positions that had already been promised to others. Bruno worked in the wealth management division of Wells Fargo’s corporate offices in Jacksonville, Florida.

His ouster, Bruno asserted, came on the heels of lodging complaints over the matter to his superiors.

The New York Times reported Bruno told his superiors the “fake interviews” were “inappropriate, morally wrong, ethically wrong.”

Those handling the case for Wells Fargo claim Bruno was let go for retaliation against a colleague.

While the matter was under federal investigation, Wells Fargo issued a statement, without referring to the investigation, extolling diversity statistics for its workforce and practices for filling executive positions, according to Fortune.com.

On August 1, Wells Fargo put a press release out on the business wire which announced they were reinstating their diverse candidate slate guidelines following a pause that started in June.

It is expected that mortgage lenders, refinancing businesses, and real estate agencies may lay off thousands of people as the market normalizes.

The pandemic is no longer driving workers out of metro markets and it is expected that the great migration is coming to an end as employers make permanent decisions about office life moving past COVID.

According to experts, mortgage origination is expected to fall 35 to 50 percent this year.

The drop in refinancing is also playing a key role in changes to the mortgage industry, as Langan expressed.

Writer Chuck Green contributed to this report.

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