Making official something that's been on the Implode-o-Meter for days, National Mortgage News is reporting this morning that Wells Fargo has decided to shut down its subprime correspondent division:
Wells Fargo Home Mortgage has shut down its nonprime correspondent lending shop in Baton Rouge, La., as subprime loan production continues to contract. "As a result of changing market conditions, we will no longer operate our Correspondent Alternative Lending channel," Wells Fargo vice president Teri Schrettenbrunner said. "We are exploring alternative options for fulfilling the nonprime needs of our correspondent clients. We will continue to serve the nonprime segment of the mortgage market through our retail and wholesale broker channels." The correspondent lending shop was shut down on June 29, and 13 positions were eliminated at the Baton Rouge office.
(I suppose Wells Fargo, which has mentioned its "commitment to the market" many times in the past, has found that an extended commitment to the subprime market right now likely means losing money.) FWIW, I've heard that subprime correspondent originations represented roughly 5 percent of origination volume at Wells Fargo in years past. I can't back that up, but if true, I'm guessing the contraction of the market had driven down the contribution level of the correspondent channel to overall originations to a point where maintaining the channel was more costly than closing it down.