Wells Fargo is retreating from the mortgage market it once led

New york

Wells Fargo, long one of the biggest players in the mortgage business, is taking a big step back.

The scandal-plagued bank announced a major shift on Tuesday to focus its mortgage business on serving the bank’s existing customers and minority buyers instead of acquiring new customers.

Wells Fargo said it would also exit its mortgage servicing business, which buys loans made by other lenders, and reduce the size of its mortgage servicing portfolio.

The withdrawal will cause Wells Fargo to lay off at least some employees, though the bank has not released any details. A spokeswoman declined to comment on the potential cancellation.

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“Mortgage is an important relationship product, and our goal is to be the primary borrower for Wells Fargo bank customers as well as minority customers,” Kleber Santos, Wells Fargo’s head of consumer lending, said in a statement.

The move comes as Wells Fargo continues to be in trouble with regulators. Last month, the Consumer Financial Protection Bureau ordered Wells Fargo to pay a record $1.7 billion fine for “widespread misconduct” over several years that damaged 16 million customer accounts.

In an interview with CNBC, Santos said the bank’s legal problems caused the decision to back off the mortgage market amid rising interest rates.

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“We’ve been very aware of Wells Fargo’s history since 2016 and the work we have to do to restore public trust,” Santos told CNBC. “As part of that review, we determined that our home loan business was too large both in terms of overall size and scope.”

Ted Rossman, senior industry analyst at Bankrate.com, said Wells Fargo “has been hit by various regulatory scandals, and it’s also a tough time for the mortgage market.”

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Rossman said the bank’s turnaround is “reminiscent of what some other big banks like Bank of America and Chase went through after the financial crisis.” They have moved more into commerce and credit cards and less into the mortgage business, which now counts non-bank fintechs such as Rocket Mortgage and loanDepot among its biggest players.

“The regulatory, economic and risk/reward accounting environment in the mortgage market has changed significantly in recent years,” Rossman said.

In late 2017, Quicken Loans overthrew Wells Fargo as America’s largest mortgage lender.


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