In recent weeks, Wells Fargo's mortgage volumes have fallen even more, leaving some employees vacant and raising concerns that the company may need to lay off additional staff if the U.S. housing crisis worsens.
After Wells Fargo started laying off staff in April, employees are tense since internal projections indicate that there may be more departures. Local news newspapers have reported when Wells Fargo branches were required to notify municipalities of imminent job losses.
People familiar with the company's financials estimate that the bank had 18,000 loans in its pipeline for retail origination in the first few weeks of the fourth quarter. That is a reduction of up to 90% from a year ago, when the housing boom sparked by the COVID pandemic was in full gear, according to sources cited by CNBC.
The housing market in the U.S.as been on a roller coaster in recent years, exploding in 2020 as a result of easy-money policies and the rise of remote labor, then slowing this year as the Federal Reserve raised interest rates.
Borrowing costs for a 30-year loan have risen to more than 7%, up from roughly 3% a year ago, putting pressure on homebuyers and slowing refinancing. Rates may rise much further as the Fed is likely to raise its key interest rate again on Wednesday.
The situation is expected to lead to consolidation among newer nonbank competitors who hurried to serve customers when the majority of U.S. banks withdrew from the sector, notably firms like Rocket Mortgage that flourished on loan refinancings.
The bank informed investors in October that the housing market would slow down even further after reporting that mortgage originations dropped by almost 60% in the third quarter.
"We expect it to remain challenging in the near term," CFO Mike Santomassimo told analysts Oct. 14. "It's possible that we have a further decline in mortgage banking revenue in the Q4 when originations are seasonally slower."
Wells Fargo has historically been the most dependent on mortgages of the six largest U.S. banks. However, that has begun to change under CEO Charlie Scharf, who has stated that the bank intends to downsize its operations and focus primarily on current customers.
The number of mortgage loan officers, who mostly receive commissions on closing deals, is forecast to fall from more than 4,000 at the start of the year to around 2,000. According to the source, several salespeople haven't closed a single loan in recent weeks.
Wells Fargo reported last month that its entire employment shrank by around 14,000 people in the third quarter, representing a 6% decrease to 239,209 employees.
