By
Godfrey Benjamin
March 26th, 2024
Like many other companies that had to reduce their headcounts, Wells Fargo is also about to go through a new layoff due to strategic changes.
The higher interest rates in the US have also taken a toll on financial services company Wells Fargo, which is withdrawing from the mortgage market. In addition to the impact of rising interest rates, the company is also facing regulatory pressure, resulting in its retrenchment. As Wells Fargo steps back from the housing market, CNBC revealed that the company’s new target is on home loans for existing banks, wealth management customers, and borrowers in minority communities.
Wells Fargo Bows Out of the US Mortgage Market
Kleber R. Santos, the Senior Executive Vice President and CEO of Consumer Lending at Wells Fargo, spoke about the reason for the decision. He explained that the development results from the Federal Reserve’s continuous interest rate hike. Santos added that there are also concerns about the long-term profitability of the lending market, which propelled the management to conclude the decision. As Wells Fargo fights a fake account scandal over the years, the company has attracted scrutiny as US authorities intensified oversight over mortgage lending over the past decade.
The matter started in 2013 after research by researchers at the Harvard Business School. The research showed fraudulent activity in the Wells Fargo sales department. It said the bank opened about 3.5 million fraudulent accounts for unwitting customers. The study and many other issuers caused regulators for banking, trading, consumer protection, and workplace safety to keep an eagle eye on Wells Fargo.
Santos referred to the scandal in a recent phone interview, explaining:
“We are acutely aware of Wells Fargo’s history since 2016 and the work we need to do to restore public confidence. As part of that review, we determined that our home-lending business was too large, both in terms of overall size and its scope.”
Wells Fargo’s Third-Party Loans
Notably, Wells Fargo exiting mortgages is the most significant shift under the leadership of CEO Charlie Scharf. Since he joined the company in 2019, the company has succeeded as one of the country’s top lenders. It was the No.1 lender in the country in 2019, with $201.8 billion in volume. Besides its mortgage withdrawal, Wells Fargo is also shutting down its business that buys loans from third-party lenders. Also, Santos revealed that the company is “significantly” taking a step back from its mortgage-servicing portfolio via asset sales.
Like many other companies that had to reduce their headcounts, Wells Fargo is also about to go through a new layoff due to strategic changes. Although the bank executives confirmed a potential firing within the mortgage operation, they did not expressly state the number of employees that would be affected. The bank already lost thousands of mortgage workers who were terminated or left voluntarily last year amid business downturns.