A report from Bloomberg News over the weekend claimed that scandal-ridden Wells Fargo—which not long ago stood as a juggernaut in the mortgage lending industry—has planned a significant strategic pullback from home loans that both preceded and transcends the current tough economic environment.
Like essentially every other mortgage lender, the bank has taken a hit in the last few months as both purchase loans and refinances have plunged in response to sharply spiking mortgage rates and broad economic headwinds. But CEO Charlie Scharf, who took the helm of Wells Fargo in 2019, told investors last month that the shift away from home lending is a much longer-term initiative.
“That’s something we’ve been doing ever since I got here,” he said. “And so we have been all along just reassessing what makes sense for us to do, how big we want to be both in the context of what our focus should be…but I guess my point was, we’re not interested in being extraordinarily large in the mortgage business just for the sake of being in the mortgage business.”
In response to an emailed inquiry from RISMedia, Wells Fargo SVP of Consumer Lending Communications Tom Goyda only said that the bank “is committed to supporting our customers and communities through our Home Lending Business.”
“Like others in the industry, we’re evaluating the size of our mortgage business to adapt to a dramatically smaller originations market,” he adds. “We’re also continuing to look across the company to prioritize and best position us to serve our customers broadly.”
Scharf, who was brought in to turn the bank around after former CEO John Stumpf was fired and banned forever from working in banking, has attempted to restructure Wells Fargo’s leadership in the wake of unprecedented scandal that involved several aspects of the business—including mortgages and consumer lending—with regulators levying billions of dollars in fines for the rampant misconduct.
For more than a decade, Wells Fargo unlawfully used consumer information to open credit cards without their permission and extracted fees and interest for these cards. More recently, an investigation found that the bank has been denying Black families refinance loans at a significantly higher rate than white families, conducting shame interviews with non-white candidates to meet quotas.
The bank saw its overall home lending segment plummet to $287 million in income for Q2 2022 compared to $1.37 billion the same quarter last year—a drop of 79%.
According to Bloomberg, the strategic shift is still being thought out, although a total halting of correspondent lending is apparently on the table. Third-party servicing operations are also on the chopping block, Bloomberg reported.
Kristy Fercho, former chair of the Mortgage Bankers Association, took over Wells Fargo’s home lending business in 2020, part of Scharf’s revamping of leadership at the company. According to Business Insider, she told employees at a town hall this summer that ongoing job cuts were about market size.
Multiple outlets have reported on layoffs at the bank over the last few months, but the full scope of staff cuts remains unclear. Goyda says he “can’t speculate about any potential job reductions” going forward.
In response to a question at last month’s conference call, Scharf denied that Wells Fargo would be moving toward an “originate and retain” model, saying the bank would continue to broadly participate in mortgage markets.
“So we’ll still be originating mortgages across the spectrum,” Scharf promised. “Some of which we’ll keep on the balance sheet when it makes sense. And others…we’ll sell and we will have an MSR. Again, if you just look at how much we originated historically versus what we’re originating today, it will naturally just come down over time.”
Jesse Williams is RISMedia’s senior editor. Email him your real estate news to jwilliams@rismedia.com.
