In a long-telegraphed move by the once preeminent mortgage lender, Wells Fargo this week announced a series of “strategic plans” broadly withdrawing from the mortgage market, including eliminating correspondent loans—another major reduction for the long-scandalized mega-bank, which for many years dominated the home-lending industry.
“Mortgage is an important relationship product, and our goal is to continue to be the primary mortgage lender to Wells Fargo bank customers as well as minority homebuyers,” said Kleber Santos, CEO of Consumer Lending at Wells Fargo in a statement. “We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus.”
Once by far the largest mortgage lender in the country, Wells Fargo has buckled under a decade-long series of scandals, most recently agreeing to pay $1.7 billion in penalties and $2 billion more in restitution to the Consumer Financial Protection Bureau. The bank has also paid fines and settlements over a practice of creating millions of fake bank accounts to meet quotas, conducting fake interviews of female and racial minority candidates and accepting kickbacks for mortgage referrals.
Over the summer, Bloomberg reported that the company was planning to move away from mortgages, including the now-official sunsetting of correspondent lending. A Wells Fargo spokesperson told RISMedia at the time that Wells Fargo “is committed to supporting our customers and communities through our Home Lending Business.”
According to a statement posted on Wells Fargo’s website on Tuesday, the company is also reducing the size of its servicing portfolio and “optimizing the Retail team to focus primarily on bank customers and underserved communities.”
“We will continue to expand our programs to reach more customers in underserved communities by leveraging our strong partnerships with the National Urban League, UnidosUS and other nonprofit organizations,” said Kristy Fercho, head of Home Lending and head of Diverse Segments, Representation and Inclusion at Wells Fargo, in a statement. “We will also hire additional mortgage consultants in communities of color.”
That includes broadening an existing $150 million investment in the company’s Special Purpose Credit Program to include purchase loans, and an additional $100 million “to advance racial equity in homeownership, including strategic partnerships with nonprofit organizations and community-focused engagements.”
It was unclear—though widely expected—that the shift would result in a significant number of layoffs. In response to an RISMedia inquiry regarding layoffs and the specifics of the racial equity investments, a Wells Fargo spokesperson said “did not have any further comment.”
CNBC reported in November that Wells Fargo was shrinking its roster of mortgage loan officers by more than half, from over 4,000 to under 2,000. The company is also facing a class action lawsuit alleging that it illegally threatened and misled former employees regarding their right to remain on the company health plan—a lawsuit that was allowed to move forward this week, according to Bloomberg Law.
Wells Fargo stock was trading flat early Wednesday.