More Wells Fargo mortgage layoffs are likely, executives say

Abstract

Layoffs in Wells Fargo's mortgage division will likely continue over the next few months as rising interest rates erode the bank's refinancing business, executives said Friday. Further declines in the third quarter are possible since the "Mortgage market is expected to remain challenging" in the near future, Chief Financial Officer Mike Santomassimo said Friday in a call with analysts. The U.S. mortgage sector has been hammered by the Federal Reserve's interest rate hikes and its reduced footprint in the mortgage-backed securities market. Refinancing made up 28% of Wells Fargo's total mortgage originations during the quarter, down substantially from 59% at the end of 2021.The home purchase market is still seeing some activity as people look to buy new houses, but purchase volumes have been "Impacted a little bit as well," Santomassimo told reporters. The group made some $34.1 billion in loans during the second quarter of 2022, down from $53 billion in the same quarter in 2019.Wells has been shifting its emphasis by making existing customers the "Primary focus" of its mortgage business, while still trying to reach more customers "To the extent that we have efficiencies," Scharf said. "We're not interested in being extraordinarily large in the mortgage business, just for the sake of being in the mortgage business," Scharf said. "We're in the home lending business because we think home lending is an important product for us to talk to our customers about, and that'll ultimately dictate the appropriate size of it."The bank's mortgage cutbacks make sense given that tough market conditions mean the opportunity is "a shadow of itself," Kenneth Leon, director of equity research at CFRA, said in an interview.