“The home lending displacements this week are the result of cyclical changes in the broader home lending environment,” a Wells Fargo’s spokesperson told HousingWire.
The company did not specify the size of the workforce reduction, though sources told HousingWire it affected hundreds of mortgage processors. Wells Fargo is providing severance, career counseling and helping employees to identify other opportunities within the company.
Last week, Wells Fargo reported it originated $37.9 billion in the first quarter of 2022, down 21% quarter-over-quarter and 27% year-over-year.
The bank’s revenues in the home lending business reached $1.5 billion, declining 19% compared to the prior quarter and 33% in comparison with the same period of 2021. The mortgage banking noninterest income came in at $693 million, down from $1.3 billion year-over-year.
During a conference call with analysts, executives said that in the first quarter of 2022, the mortgage market had experienced the largest quarterly decline since 2003, primarily due to lower refinance activity.
“The mortgage origination market experienced one of its largest quarterly declines that I can remember, and it will take time for the industry to reduce excess capacity,” Charlie Scharf, Wells Fargo’s CEO, said to analysts.
The bank has also been closing branches across the country to reduce costs.
According to executives, originations and margins will likely remain under pressure in the second quarter. “We started to reduce expenses in response,” Mike Santomassimo, the bank’s chief financial officer, said during the call.
Fast-rising interest rates are hitting mortgage lenders hard, and companies across the industry are paring back their workforces to preserve cash.
On Tuesday, publicly traded mortgage tech company Blend Labs announced a decrease of 10% in its workforce this week, eliminating about 200 positions. The Nima Ghamsari-led fintech will yield approximately $35.4 million per year in savings, according to executives.
On the same day, Better.com announced that it would be executing its third major layoff, though it did not disclose how many workers would be shown the door.
Several non-QM lenders, including Acra Lending, Sprout Mortgage and Excelerate Capital, have also trimmed staff.
In early March, HousingWire reported that Pennymac Financial Services would be laying off 236 employees at six different offices in five California cities. Also, purchase-focused retail lender Movement Mortgage, the 24th largest mortgage lender in the country in 2021, laid off between 165 and 170 employees in March, sources told HousingWire.