SAN FRANCISCO–Wells Fargo is retreating from the U.S. mortgage market, citing both regulatory scrutiny and higher interest rates.
Instead of seeking to underwrite as many mortgages for Americans as it can, the bank said it will instead focus on home loans for existing bank and wealth management customers and borrowers in minority communities.
According to Wells Fargo’s head of consumer lending, Kleber Santos, the ongoing rate increases have raised questions around the long-term profitability of mortgage lending, CNBC reported.
In addition, as CUToday.info has reported on a regular basis, the bank is also under strong regulatory scrutiny for a series of transgressions, beginning with its 2016 fake account scandal, and then most recently it was hit with nearly $4 billion in fines by the CFPB, which called it a “repeat offender.”
More Emphasis on Other Areas
The move away from mortgages comes as the bank’s CEO, Charles Scharf, has pushed it to be more aggressive in investment banking and credit cards.
As part of its retrenchment, Wells Fargo is also shuttering its correspondent business that buys loans made by third-party lenders and "significantly" shrinking its mortgage-servicing portfolio through asset sales, Santos told CNBC.
Wells Fargo is the biggest U.S. mortgage servicer, with nearly $1 trillion in loans, or 7.3% of the market, as of the third quarter, according to data from Inside Mortgage Finance cited in the report.
Wells Fargo acknowledged the shift form mortgages will result in layoffs, but it declined to say how many jobs will be involved.
$100 Million Toward Minority Homeownership
Wells Fargo said it is investing $100 million toward its goal of minority homeownership and placing more mortgage consultants in branches located in minority communities.
"Our priority is to de-risk the place, to focus on serving our own customers and play the role that society expects us to play as it relates to the racial homeownership gap," Santos told CNBC.
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