Wells Fargo makes further deep cuts to its mortgage division

Bank has been open about its intention to shrink its mortgage footprint

Wells Fargo, the largest depository mortgage lender in America, cut hundreds of home lending jobs across the country on Thursday.

Bloomberg first reported the news of the layoff, which is just the latest round of cuts for a lender that’s been open about its retreat from the upper echelon of the mortgage rankings.

The company declined to state how many jobs were shed on Thursday.

“We regularly review and adjust staffing levels to align with market conditions and the needs of our businesses,” a spokesperson for the bank told HousingWire.

HousingWire reported three weeks ago that the lender was shedding an undisclosed number of jobs on the heels of a third quarter in which originations were down 59% year-over-year. Several other rounds of cuts have taken place since the beginning of the year as origination volume has plummeted.

Wells Fargo, the third-largest U.S. mortgage lender by volume through the first three quarters of the year, originated $21.5 billion in Q3 2022, a 37% decline quarter-over-quarter. Refinancings fell to 16% of the mix.

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The correspondent channel, which the company is reportedly shrinking, was responsible for $9.1 billion of the total production in the third quarter of 2022, declining 46% year-over-year. The retail channel, at $12.4 billion in volume, fell 65% in the same period. 

Wells Fargo’s mortgage banking noninterest income came in at $324 million in the third quarter, an increase from $287 million in the previous quarter, but a decrease from $1.2 billion in the same period of 2021. 

Mike Santomassimo, the COO, told investors in October that the home lending business will “remain challenging in the near term,” and that executives were focused on managing costs.

That echoes comments CEO Charlie Scharf made in June, when he said Wells Fargo was “in the process of changing, strategically, where mortgage fits in.”

Scharf, who’s battled a series of controversies related to alleged minority borrowing discrimination and unethical hiring practices, cited lending standards for conforming loans set by Fannie Mae and Freddie Mac as one of the reasons for reducing its mortgage footprint.

“We basically process the applications according to guidelines that the GSEs tell us we should,” Scharf said. “When those produce results, the people like them, we get the kudos for it. If they don’t like them, we get the blame for it, even though we’re just following other people’s underwriting guidelines.”

Scharf also argued in June that depository banks are held to higher standards than nonbank mortgage lenders.

“It’s very different today running a mortgage business inside the bank than it was 15 years ago, and I think appropriately so,” he said. “That does force you to sit back and say, ‘What does that mean? How big do you want to be? Where does it fit in?’”

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