Amid pressure from regulators and the effects of rising interest rates, Wells Fargo is pulling back from the multitrillion-dollar U.S. mortgage business.

According to CNBC, the company would now prioritize home loans for current bank and wealth management clients, as well as borrowers in minority neighborhoods, as opposed to its earlier objective of reaching as many Americans as possible.

Since joining Wells Fargo in late 2019, it is the CEO Charlie Scharf's most recent and possibly most important strategic move. Around 71% of the $16.5 trillion in total household balances, or the largest category of debt owned by Americans, make up mortgages

Wells Fargo took pride in its large share of home loans under Scharf's predecessors - it was the country's top lender as recently as 2019, with $201.8 billion in volume, according to industry newsletter Inside Mortgage Finance.

The decision was influenced by two factors: a loan market that has plummeted since the Federal Reserve began rising rates last year, and concerns about the business's long-term profitability, according to consumer lending chief Kleber Santos. Over the last decade, regulators have increased regulation of mortgage lending, and Wells Fargo has been under more scrutiny following its 2016 fake accounts scandal.

"We are acutely aware of Wells Fargo's history since 2016 and the work we need to do to restore public confidence," Santos told CNBC. "As part of that review, we determined that our home-lending business was too large, both in terms of overall size and its scope."

Executives admitted that the change will also lead to a new round of layoffs for the bank's mortgage operations, although they would not say just how many employees would be lost. As sales decreased last year, thousands of mortgage employees were fired or departed the company.

According to Santos, Wells Fargo is also selling off assets in order to "significantly" reduce the size of its mortgage-servicing portfolio in addition to closing down its correspondent business, which purchased loans issued by independent lenders.

For San Francisco-based Wells Fargo, the correspondence channel represents a sizable revenue stream that grew greater as total loan activity declined last year. The bank said in October that correspondent loans made up 42% of the $21.5 billion in loans it originated in the third quarter.

Depending on the state of the market, Santos estimated that the transfer of mortgage-servicing rights to other industry players would take at least several quarters to complete.

As of the third quarter, Wells Fargo had approximately $1 trillion in loans, or 7.3% of the market, making it the largest U.S. mortgage servicer in terms of collecting payments from borrowers.