»Wells Fargo withdraws from the mortgage industry it once controlled«
Wells Fargo is reducing its once-vast mortgage-lending business as it endures a downturn in the US housing market and more scrutiny from federal authorities.
The organization based in San Francisco announced on Tuesday that it would scale back its mortgage services to concentrate on existing “bank customers” as well as individuals and families in minority areas.
Wells Fargo is also discontinuing its correspondent business, in which the bank purchased mortgage loans from other lenders, and its mortgage servicing portfolio.
CEO of Wells Fargo’s consumer lending division Kleber Santos said in a statement, “We have decided to continue reducing risk in the mortgage business by reducing its size and narrowing its focus.”
Wells Fargo, formerly the nation’s top mortgage lender, made a significant shift in approach with this decision. According to the trade journal Inside Mortgage Finance, the bank’s lending volume in 2019 was $201.8 billion.
In the past year, the volume of new mortgage and refinancing applications plummeted to a 25-year low as a result of the Federal Reserve’s series of accelerated rate hikes. Last week, the average 30-year fixed mortgage rate was 6.48 percent, roughly double the rate from the same week one year prior.
It was initially unclear whether Wells Fargo’s adjustment in strategy would result in layoffs. The Post has contacted the bank for additional comments.
Bloomberg reported in December that Wells Fargo had fired off “hundreds” of mortgage lending division staff owing to the continued housing market collapse.
Wells Fargo declared as part of its reorganization that it would commit $100 million “to advance racial equity in home ownership, including strategic partnerships with non-profit organizations and community-focused engagements.”
Wells Fargo has recently agreed to pay a record $3.7 billion to settle allegations brought by the Consumer Financial Protection Bureau, which accused the bank of engaging in a “cycle of repeated lawbreaking” that “harmed millions of American families.
The institution was accused of multiple infractions throughout its mortgage, car loans, and banking sectors, including wrongfully rejecting thousands of mortgage modification applications from customers. In several instances, the rejections led to the foreclosure of the customers’ homes.
In 2018, the Federal Reserve imposed a limit on Wells Fargo’s assets of $1.95 trillion. Jerome Powell, chairman of the Federal Reserve, has indicated that the cap will remain in place until Wells Fargo’s troubles are adequately handled.
In an interview with CNBC, Wells Fargo’s Santos explained that regulatory monitoring of its mortgage division contributed to the adjustment in strategy.
Santos stated, “We are acutely aware of Wells Fargo’s history since 2016 and the work required to restore public confidence.” “As a result of this review, we determined that our home-lending business was excessively large, both in terms of size and scope.”
»Wells Fargo withdraws from the mortgage industry it once controlled«