Regardless of lengthy being the #1 mortgage lender within the nation, Wells Fargo has introduced plans to shrink its mortgage enterprise.
The San Francisco-based financial institution stated it’ll exit its correspondent lending enterprise, whereas focusing extra on financial institution prospects and minority communities.
Moreover, the corporate will scale back the dimensions of its mortgage servicing portfolio, through which it collects month-to-month funds from owners.
Consequently, the corporate will considerably scale back its mortgage footprint, which had been the biggest previous to the rise of Rocket Mortgage.
Within the fourth quarter of 2017, Quicken Loans unseated Wells Fargo and principally by no means regarded again. They modified their identify to Rocket Mortgage in Might 2021.
Wells Fargo Exits Correspondent Lending
First issues first, Wells Fargo is exiting the correspondent lending enterprise, which is principally the resale of their mortgage merchandise by third-party corporations like credit score unions.
These smaller entities “originate, underwrite and shut mortgage loans earlier than promoting them to Wells Fargo Funding,” their web site states.
Per HMDA knowledge from Richey Might, Wells Fargo funded roughly $228.6 billion in residence loans in 2021(most up-to-date yr accessible).
Of that whole, about $69 billion, or 30%, was by way of the correspondent lending channel.
It exhibits one other $11 billion, or 5 %, originated by way of the wholesale lending channel, which is reserved for mortgage dealer companions.
However Wells Fargo had exited wholesale lending again in 2012, so it’s unclear if that quantity is correct.
In any case, they have been the second largest mortgage lender in the US in 2021, behind Rocket Mortgage’s $343 billion.
If we subtract the $69 billion in correspondent lending, their whole would drop to round $160 billion. We are able to ignore the wholesale numbers for now.
That might make Wells Fargo the fourth largest mortgage lender, behind Rocket, United Wholesale Mortgage, and Chase.
So nonetheless fairly giant, even with out the third-party origination quantity. However wait, there’s extra.
Wells Fargo Mortgage to Give attention to Financial institution Prospects and Minorities
Whereas a CNBC article indicated Wells Fargo would “solely make residence loans to financial institution purchasers and minority debtors,” that seems to be incorrect.
Nevertheless, the corporate did say it “plans to create a extra targeted Dwelling Lending enterprise aimed toward serving financial institution prospects, in addition to people and households in minority communities.”
Additionally they check with this new technique as a “smaller, much less complicated enterprise,” which could spell extra mortgage layoffs and lowered mortgage volumes.
It’s unclear how targeted they plan to get and/or how a lot smaller, however it’s clear they’re going to take a extra calculated strategy
This contains “optimizing” their retail staff to focus totally on present financial institution prospects and underserved communities.
To that finish, they’ll deploy extra residence mortgage consultants in native minority communities, whereas investing $100 million “to advance racial fairness in homeownership.”
The corporate can even broaden its Particular Goal Credit score Program (SPCP) that assists minority owners.
Wells Fargo famous again in April 2022 that it was the highest mortgage lender for “Black households” and the highest refinance lender for Black owners.
Actually, in 2020 the corporate apparently prolonged roughly the identical variety of residence buy loans to Black households as the subsequent three largest bank-lenders mixed.
Can Anybody Nonetheless Get a Mortgage from Wells Fargo?
As talked about, Wells Fargo introduced plans to considerably shrink their residence lending enterprise.
On the similar time, they’ll focus extra on present financial institution prospects and minority communities.
Nevertheless, this doesn’t imply you possibly can’t get a mortgage from Wells Fargo in the event you don’t match the above classes.
It simply would possibly imply that you simply received’t be receiving incoming emails or telephone calls from residence mortgage consultants at Wells Fargo.
It could additionally imply that those that do match the classes above could also be eligible for particular gives and pricing from the financial institution.
Lastly, in the event you’re an present mortgage servicing buyer, it’s attainable your mortgage is likely to be transferred to a brand new mortgage servicer.
So preserve an eye fixed out for any modifications to make sure future mortgage funds are routed to the suitable place.
General, this information doesn’t come as an enormous shock given Wells Fargo’s struggles of late within the residence lending area, together with alleged improper lock charges.
And given the general local weather within the mortgage area in the intervening time, it’s not likely a shocker to see any firm scaling again.