Bank / Credit Union

Wells Fargo to reduce mortgages

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August 16, 2022

Wells Fargo, once the top bank for mortgages, plans to roll back its efforts in the space. It will likely begin this strategy by cutting ties to outside mortgage firms, which made up a third of its $205 billion in home loans last year, according to a report by Bloomberg

After the 2008 financial crisis and ensuing recession, many banks decided to moderate their mortgages, but Wells Fargo did not. However, the bank's executives now plan to cut down on new loans and focus on existing relationships with Wells Fargo.

"Wells Fargo is committed to supporting our customers and communities through our home-lending business," Wells Fargo said in a statement. "Like others in the industry, we're evaluating the size of our mortgage business to adapt to a dramatically smaller originations market. We're also continuing to look across the company to prioritize and best position us to serve our customers broadly."

The bank's mortgage business has suffered a variety of scandals in recent years. In 2018, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau fined it $1 billion for abuses such as overcharging customers. The bank also found a software glitch had denied loan modifications to struggling buyers who would have otherwise qualified, thus causing foreclosures. The OCC also reprimanded the bank in 2021 due to lack of progress in helping people avoid foreclosures

Most recently, there is a massive gap between the bank's approval rates for white and Black homeowners, with only 47% of Black people being approved for refinancing compared to 72% of white people, according to the Bloomberg report.

"We're not interested in being extraordinarily large in the mortgage business just for the sake of being in the mortgage business," Charlie Scharf, CEO of Wells Fargo, told analysts on a conference call last month. "We are in the home-lending business because we think home lending is an important product for us to talk to our customers about, and that will ultimately dictate the appropriate size of it."