How Wells Fargo’s Mortgage Pullback Affects Borrowers | Bank

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In a move that reflects an ongoing shift in the mortgage market, Wells Fargo announced on January 10 that it will reduce the use of the business in the future.

The major bank will continue to offer mortgages to customers who already have information and relationships with the financial institution, and will also maintain by the megabank its efforts to narrow the racial gap in home ownership. But it looks like Wells Fargo will abandon its position as one of the country largest mortgage.

“They will still be in the mortgage business, not a big national player,” said Guy Cecala, publisher of “Inside Mortgage Finance.”

Wells joins the ranks of traditional banks that have established themselves as the strongest mortgage originators. A new type of mortgage companies – most of them, like Rocket mortgageonline processing priority – it’s running smoothly.

What the Wells Fargo haul means for consumers

In 2021, Wells Fargo received 376,000 loans – the fourth-largest number in the country – for a total of $ 159 billion. In terms of loan prices, it is ranked as the third-largest lender in the US, according to the Home Mortgage Disclosure Act. However, 2022 proves to be a difficult year for the mortgage industry as a whole interest flying Wells Fargo on Friday reported a 57 percent drop in mortgage income in the fourth quarter of 2022 compared to the same period in 2021.

It is not clear what number from the Wells Fargo reduced use, but the bank is determined to recover. For borrowers — especially those who aren’t Wells Fargo investors — the move means less choice.

“When you eliminate a competitor, it’s not good news for consumers,” said Ken Thomas, a banking analyst who has founder of the Miami-based Community Development Fund. “Less competitors mean prices are going up. Some of the closing costs may go up. There are a lot of areas that are not rated as a mortgage.”

Now more than ever, common sense applies: Borrowers must shop around. By comparing at least three mortgage offers from competing lenders, you can save thousands of dollars over the life of your loan.

“There will be fewer foreign competitors,” said Cecala. “Therefore, the banks are not the most competitive.”

It’s a love-hate relationship with mortgages

Banks are still in the mortgage business, of course. In a bid to attract the wealthy, they are targeting jumbo mortgages — big-ticket ($647,000-plus) loans for luxury homes — and Discount and trade-in mortgages are often marketed to their best customers.

But if you’ve taken out a mortgage in the past two years, there’s a chance you’ll opt for a non-bank loan instead of the institution where you deposit your check and deposit. This is because traditional financial institutions, even those with residential mortgage departments, have largely reduced their home financing.

Only two banks (Wells Fargo and JPMorgan Chase) ranked among the top 10 lenders by number of mortgages originated in 2021, according to federal data the Home Mortgage Disclosure Act.

“Going back over the years, banks have had a love-hate relationship with mortgages,” Cecala said. After the boom in real estate and anything goes in the early 2000’s, many of them burned down because of the mortgage meltdown and the financial crisis of 2007-2008. Bankers continue to chafe under the tighter guidelines that emerged in the aftermath of the Great Depression.

But, banks may still mortgage players, even if it is in a limited way. “It is very difficult for a bank to abandon mortgage loans for a long time, because it is a very important part of the financial life of their customers,” said Cecala.

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As brick-and-mortar institutions retreat from home financing, other lenders such as Rocket Mortgage, United Wholesale Mortgage and are stepping in eagerly. the breach, buy market share. In 2021, the top three caused the number of mortgages non-bankers. The top two in the value of loans are also non-banks: Rocket Mortgage (with $340 billion worth of mortgages) and United Wholesale Mortgage ($227 billion).

Rocket in particular has paved the way for other lenders. Now, “they’re the biggest investors,” Thomas said. “They have been controlling the market for a long time, in every way. No one can compete with them.”

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