Wells Fargo cuts 140 jobs as it exits the correspondent channel
Wells Fargo cut over a hundred jobs in its mortgage division this week following its decision to exit the correspondent channel and shrink its servicing portfolio.
A Worker Adjustment and Retraining Notification (WARN) filed in Illinois on January 18 outlines the bank’s plan to impose layoffs that will affect 140 employees. The workforce reduction started on Tuesday at the Wells Fargo Mortgage office in Springfield.
“As we said in our January 10 press release, we are exiting the correspondent lending business. The 140 employees in Springfield are part of the correspondent team,” a spokesperson for Wells Fargo told HousingWire.
The bank did not provide further details, such as the employees’ job positions.
Wells, the top depository mortgage lender in America, recently decided to stop purchasing loans from correspondent lenders.
This channel, which relies on small originators, is purchase-focused. However, it has lower margins due to payments made to a network of small lenders and brings a “reputational risk” when financing large amounts of loans originated from other firms.
Wells also decided to reduce its mortgage servicing rights (MSRs) book. And, so far, rumors about the bank selling its MSRs have influenced market perceptions.
“We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus,” Kleber Santos, CEO of consumer lending, said in a statement.
Last year, Wells Fargo’s total originations declined 47% to $108 billion. It originated $14.6 billion in mortgages in the fourth quarter, down 32% quarter-over-quarter and 70% year-over-year.
The bank’s mortgage servicing rights – carrying value (period-end)– decreased by 5%, dropping from $9.8 billion in the third quarter of 2022 to $9.3 billion in the fourth quarter. Compared with Q4 2021, servicing UPB increased by 35%. The net servicing income rose 16% quarter-over-quarter to $94 million but was down 25% year-over-year.
The bank has imposed several layoffs of its mortgage employees, cutting hundreds of jobs in December.