Wells Fargo, once the No. 1 mortgage lender, has stepped back from the housing market

Wells Fargo is stepping back from the multibillion-dollar U.S. mortgage market amid regulatory pressures and the impact of higher interest rates.

Instead of its original goal of reaching as many Americans as possible, the company will now focus on home loans for existing banks and buy money and borrowers in small communities, it has been learned by CNBC.

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Both sides of a loan market have collapsed since the Federal Reserve began raise prices last year and questions about the long-term profitability of the business led to the decision, the loan manager said. Kleber Santos. Regulators have increased oversight of mortgage lending over the past decade, and Wells Fargo came under further scrutiny after its 2016 false news damage

“We are very aware of Wells Fargo’s history since 2016 and the work we have to do to restore public confidence,” Santos said in a telephone interview. “As part of that review, we realized that our mortgage business is very large, both in terms of scope and scope.”

The latest change, and perhaps the most important, is the CEO strategy Charlie Scharf made since joining Wells Fargo at the end of 2019. Mortgages are far big part of debt held by Americans, accounts for 71% of the $16.5 million in total household balances. Under Scharf’s predecessor, Wells Fargo boasted its largest share of home loans — the nation’s top lender in 2019 when it totaled $201.8 billion, according to industry news. . Internal Mortgage.

More like competitors

Now, as a result of this and other changes Scharf is making, including a push for more revenue from investment banking and credit cards, Wells Fargo will look more like megabank competitor. Bank of America and JPMorgan Chase. The two companies issued mortgage shares after the 2008 financial crisis.

The reduction of those large operations has implications for the US mortgage market.

As banks pulled back from home loans after the housing crash of the early 2000s, non-bank players were included. Rocket mortgage quickly fill the vacancy. But these new players are not regulated as strictly as banks, and critics of the industry say they can expose consumers to risks. Currently, Wells Fargo is the third largest mortgage lender after Rocket and United Wholesale Mortgage.

Third party loans, services

Wells Fargo takes a big step back from the housing market

The sale of mortgage-service rights to other industry players will take at least several quarters to complete, depending on market conditions, Santos said. Wells Fargo is the largest American mortgage company, which includes the collection of payments from borrowers, and nearly $ 1 trillion in loans, or 7.3% of the market, in the third quarter, according to with data from Inside Mortgage Finance.

Lots of healing

After all, the change will result in a new round of suspension for the implementation of bank mortgages, the authorities said, but they refused to calculate exactly how many jobs will be lost. There are thousands of mortgage brokers terminate or voluntarily leave the company last year because business was down.

The news should not be a big surprise to business owners or employees. Wells Fargo employees have been speculating for months about the changes to come after Scharf announced his intentions several times last year. Bloomberg reported in August that the bank was considering ending or suspending the supply of journalists.

“It’s very different today to run a mortgage business in a bank than it was 15 years ago,” Scharf told analysts in June. “We’re not as big as we’ve been historically” in the industry, he added.

Last change?

Wells Fargo said it is investing $100 million toward its goal of reducing home ownership and providing more mortgage advisors to branches located in smaller communities.

“Our priority is to de-risk the site, focus on serving our own customers and play the role that society expects us to play. done according to the relationship between the homeowners,” said Santos.

The mortgage shift marks Scharf’s major restructuring after splitting the bank’s operations into five divisions and bringing in new board members. there are 12 and form a diverse group.

In a telephone interview, Scharf said he did not consider making other major changes, noting that the bank needs to adapt to the changing conditions.

“Given the quality of the five major businesses in the franchise, we think we are positioned to compete with the best out there and win, whether they are banks, nonbanks or fintechs,” he said.

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