The bank had about 18,000 loans in its retail origination pipeline in the early weeks of the fourth quarter, according to people with knowledge of the company’s figures. That is down as much as 90% from a year earlier, when the Covid pandemic-fueled housing boom was in full swing, said the people, who declined to be identified speaking about internal matters.
The U.S. housing market has been on a roller coaster in recent years, taking off in 2020 thanks to easy-money policies and the adoption of remote work, and slowing down this year as the Federal Reserve boosted rates. Homebuyers have been squeezed and the pace of refinancing has plummeted as borrowing costs surged to more than 7% for a 30-year loan from about 3% a year earlier. And rates may climb further as the Fed is expected to boost its benchmark rate again Wednesday.
The situation has pressured the home loan industry, particularly firms like Rocket Mortgage that thrived on loan refinancings, and is expected to lead to consolidation among newer nonbank players that rushed to serve customers after most U.S. banks receded from the market.
Among the six biggest U.S. banks, Wells Fargo has historically been the most reliant on mortgages. But that has begun to change under CEO Charlie Scharf, who has said that the bank is looking to shrink the business and focus primarily on serving existing customers.
In October, the bank warned investors that the housing market could slow further after saying that mortgage originations fell nearly 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.”
Employees are on edge after the bank began cutting workers in April and internal projections point to more departures. Local news outlets have reported when Wells Fargo offices have been required to disclose impending job cuts in a municipality.
The ranks of mortgage loan officers, who mainly earn commissions from closing deals, is expected to drop to under 2,000 from more than 4,000 at the start of the year, according to one of the people. Many salespeople haven’t closed a single loan in recent weeks, this person said.
Another person said that most of the exits have been voluntary as bankers sought other opportunities, making departures and staffing levels hard to predict.
“The changes we’ve recently made are the result of the broader rate environment and consistent with the response of other lenders in the industry,” a Wells Fargo spokesman said in a statement. “We regularly review and adjust staffing levels to align with market conditions and the needs of our businesses.”
The bank said last month that its total workforce shrank by about 14,000 people in the third quarter, a 6% decline to 239,209 employees.
Wells Fargo shares are down about 2% since the start of the year.