Wells Fargo, a once-dominant player in the U.S. mortgage market, has begun its significant retreat from the sector.
The bank is shifting its focus from reaching as many homeowners as possible to working with existing bank and wealth management customers, CNBC reported. The company will also continue trying to reach borrowers in minority communities.
As part of the retreat, the bank is closing its correspondent lending business that buys loans by third-party firms, which the bank cited for 42 percent of its third quarter originations.
It also plans to shrink its mortgage-servicing portfolio through asset sales. Those sales could take several quarters, as the company is the largest mortgage servicer in the country.
More layoffs are expected as part of the company’s mortgage pullback, but the timing and number of cuts weren’t reported.
Bloomberg reported Wells Fargo’s expected pullback from the mortgage market in August.
Only four years ago, Wells Fargo was the biggest lender in the country, responsible for $201.8 billion in home loans, according to Inside Mortgage Finance. At its peak, the bank was responsible for one in every three home loans in the United States. The company ranks third among mortgage lenders today, behind Rocket Mortgage and United Wholesale Mortgage.
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In 2020, Wells Fargo rejected nearly half its Black applicants for a mortgage refinance
Wells Fargo began looking at a reduction in its activities last summer, when mortgage demand shrank as rates soared on the back of the Federal Reserve interest rate hikes. Those increases are expected to ease and mortgage rates are stabilizing, but the bank already made up its mind.
In 2021, a federal oversight body fined Wells Fargo $250 million for unsafe practices regarding its mortgage lending loss mitigation program. The bank was accused of failing to comply with a 2018 order mandating it identify and reimburse customers charged improper fees by the mortgage lending arm.
The bank was also restricted from future activities until fixing ongoing problems, banned from acquiring some residential mortgage servicers and transferring borrowers out of the bank’s loan servicing arm.
A Bloomberg analysis last year revealed the bank turned down nearly half of the refinance applications submitted by Black homeowners in 2020. The company approved nearly three-quarters of those sent by white applicants in the same period.
— Holden Walter-Warner