Wells Fargo & Co (NYSE:WFC) is reducing the number of its employees working in its home loan business as interest rates starts to increase and only a few customers are encouraged to refinance their mortgages.
Wells Fargo issues layoff notices
According to a report from Bloomberg, the fourth largest bank in the United States in terms of assets will dismiss 2,300 employees. Wells Fargo & Co (NYSE:WFC) has 11,406 mortgage loan officers as of March this year. The bank issues 60-day layoff notices to the affected workers.
Franklin Codel, head of mortgage production at Wells Fargo & Co (NYSE:WFC) said that mortgage refinancing accounts more than 70% of the home lending volume in the United States during the past two quarters of 2013. However, the figure declined to approximately 50% and he projected that it will continue to fall.
Codel said, “We’ve had to recalibrate our business to meet customers’ needs, and to ensure we’re operating as efficiently and effectively as possible. Unfortunately, displacements within our team are necessary.”
“Our focus on purchase business and strengthening our Realtor and builder partnerships is helping us build momentum in local markets,” added Codel.
Wells Fargo’s Mortgage Business
During the bank’s conference call with analysts last July 12, Tim Sloan, chief financial officer at Wells Fargo & Co (NYSE:WFC) stated that the bank expected that an increase mortgage rates would affect its mortgage business. Sloan indicated the possibility that the bank will no longer be able to make more than $100 billion of home loans, which it made during the past seven consecutive quarters.
“We just don’t think that we are going to see $100 billion of mortgage volume, given the current rates today, in the third quarter. We will need to go ahead and make some adjustments,” said Sloan.
Wells Fargo & Co (NYSE:WFC) spokesperson Jennifer A. Temple said that the bank is trying its best to retain as many employees as possible by assigning them in other positions.
According to Inside Mortgage Finance, Wells Fargo & Co (NYSE:WFC) accounted for one out of three home mortgages in the country last year. The bank’s market share in home loans fell to 23% in the second quarter. Its mortgage banking income was $2.8 billion, a decline of 3% during the period.