WFC in Wells Fargo fell -0.07% and the company scaled back its mortgage business after a series of scandals and record fines from the Consumer Financial Protection Bureau.
Going forward, the bank said it will focus primarily on lending to existing customers and minority borrowers. You will no longer work with third party brokers who process loans on behalf of banks. This practice, known as correspondent banking, accounts for nearly half of all mortgages.
Wells Fargo also said it would reduce the size of its portfolio of services, loans that collect payments and earn fees for doing so.
Wells Fargo's competitors have decided to scale back the mortgage business since the last financial crisis, losing market share to non-bank mortgage companies after paying billions of dollars in fines. On the other hand, Wales has been the largest mortgage lender in the country for many years.
The bank has begun to reassess its home loan business under CEO Charles Scharf, who took over in 2019 and has been trying to improve the bank's reputation with regulators after a fraudulent collections scandal in 2016. Problems have been exposed across the bank, including in the foreclosure business. real estate. . .
In December, Wells Fargo completed a $3.7 billion settlement with CFPB to settle allegations that it abused customers, including borrowers. The consumer watchdog said banks were illegally assessing interest rates and interest on loans to buy homes and cars. That settlement included a record fine of $1.7 billion for the agency.
Wells Fargo was fined $250 million in 2021 by the Office of the Comptroller of the Currency for failing to develop a program to help customers avoid losing their homes.
The slowdown in the housing market created another problem. Mortgage rates have more than doubled in the past year, prompting a refinancing boom that has fueled the mortgage business in recent years. Some lenders that thrived in 2021 will have to lay off employees or go out of business in 2022.
Wells Fargo took out about $21.5 billion in home loans in the third quarter, down nearly 60% from a year earlier.
Wells Fargo has been operating with a total asset cap since 2018, which is the Fed's punishment for failing to manage risk.
The fines and other payments are expected to hurt Wells Fargo's fourth-quarter earnings, which are set to be released on Friday. In the third quarter, the bank incurred $2 billion in costs related to long-running legal and regulatory issues.
Russell Ben Eisen at [email protected] and Gina Heeb at [email protected]
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Appears in the January 11, 2023 print issue of Wells Fargo Cutting Mortgage Business.
