Wells Fargo’s mortgage staff brace for layoffs as US loan volumes plummet

Mortgage volumes a Wells Fargo has slowed further in recent weeks, leaving some workers inactive and raising concerns that the lender will have to cut more staff as the US housing crisis deepens.

The bank had around 18,000 loans in its retail origination pipeline in the first weeks of the fourth quarter, according to people familiar with the company’s numbers. It’s down about 90 percent from a year ago when the pandemic-fueled housing boom was in full swing, said the people, who declined to be identified when talking about domestic issues.

The US real estate market has been on a roller coaster in recent years, kicking off in 2020 thanks to easy money policies and the adoption of remote work, and this year has slowed with the Federal Reserve’s rate hike. Homebuyers were reduced and the pace of refinancing slowed as borrowing costs rose to more than 7% for a 30-year loan from around 3% the previous year. And rates could rise further as the Fed is expected to raise the benchmark rate again on Wednesday.

The situation has put pressure on the mortgage industry, especially companies such as Rocket mortgage which has thrived on loan refinancing and is expected to lead to consolidation among new non-bank players rushing to serve customers after most US banks withdrew from the market.

Of the six largest US banks, Wells Fargo has historically been the most dependent on mortgages. But things started to change under CEO Charlie Scharf, who said the bank was looking to scale down business and focus primarily on serving existing customers.

Early warning

In October, the bank warned investors that the housing market could slow further after it said mortgage lending fell nearly 60% in the third quarter.

“We expect it to remain a challenge in the short term,” Chief Financial Officer Mike Santomassimo told analysts on Oct. 14. “It is possible that we will have a further decline in mortgage bank revenues in the fourth quarter, when originations are seasonally slower.”

Employees are nervous after the bank began laying off workers in April, and internal projections point to more departures. Local media reported when Wells Fargo offices were asked to disclose upcoming job cuts in a municipality.

The ranks of mortgage lending officers, who mostly earn commission on closing deals, are expected to drop to less than 2,000 from more than 4,000 at the start of the year, according to one of the people. Many sellers haven’t closed a single loan in the past few weeks, this person said.

Another person said that most departures were voluntary as bankers looked for other opportunities, making it difficult to predict departures and headcount.

“The changes we have recently made are the result of a broader pricing environment and are consistent with the response from other lenders in the industry,” a Wells Fargo spokesperson said in a statement. “We regularly review and adjust staffing levels to align them with market conditions and the needs of our businesses.”

The bank said last month that its total workforce shrank by about 14,000 in the third quarter, down 6% to 239,209 employees.

Wells Fargo shares are down about 2% since the beginning of the year.

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