Wells Fargo & Co. (WFC), the biggest U.S. home lender, will eliminate 2,300 jobs in mortgage production because demand for refinancings has slumped and probably will drop more as interest rates rise.
Other smaller cuts were made in the past few weeks around the country, said people with knowledge of the matter, who asked for anonymity because the changes haven’t been publicly disclosed. The reductions would equal about 20 percent of the firm’s 11,406 mortgage loan officers employed as of March 31.
Wells Fargo has said mortgage lending will slow for the rest of this year as higher interest rates make refinancing less attractive. Those loans, which made up 70 percent of the mortgage market during the first half, slid to about 50 percent of applications recently and could fall further in coming months, Franklin Codel, head of mortgage production for the San Francisco-based bank, said in a memo to staff yesterday.
“We’ve had to recalibrate our business to meet customers’ needs -- and to ensure we’re operating as efficiently and effectively as possible,” Codel wrote. “Unfortunately, displacements within our team are necessary.”
Quarterly mortgage originations will drop to less than $100 billion in the third quarter, spurring the lender to adjust the size of its staff, Chief Financial Officer Timothy Sloan said during the bank’s second-quarter earnings conference call. The company made $112 billion mortgages in the three months ended June 30.
Wells Fargo was the largest employer among U.S. banks at midyear with about 274,000 people. The workers whose positions are being cut received 60 days’ notice yesterday and the firm is seeking to retain as many as possible by placing them in other jobs, said Jennifer A. Temple, a company spokeswoman.
Wells Fargo fell 0.5 percent to $42.36 in New York yesterday. The shares climbed 24 percent this year through yesterday, outpacing the 20 percent advance for the 81-company Standard & Poor’s Financials Index.
The interest rate on a 30-year fixed-rate home loan soared a record 35 percent in the 10 weeks ended July 11 to reach a two-year high of 4.51 percent, according to data compiled by Freddie Mac. The benchmark gauge for home financing was 4.4 percent last week, compared with a record-low 3.31 percent in November.
As rates have risen, so-called refis have slowed and Wells Fargo has redoubled efforts to boost lending in the market for home purchases. Former University of Notre Dame football coach Lou Holtz attended an April event to help Wells Fargo woo real-estate agents and drum up customers. The company also has worked to shorten the time it takes to complete each loan.
“Our focus on purchase business and strengthening our Realtor and builder partnerships is helping us build momentum in local markets,” wrote Codel, who reports to Michael Heid, head of the bank’s mortgage business.
Mortgages typically are divided into those for refinancing existing loans and for home purchases. While refis are mainly tied to the level of interest rates, purchase mortgages are tied to home-sale activity.
Heid, at a November investor conference, referred to a presentation with a slide titled “Capacity management is key to a successful retail origination business.” The document, which illustrated the cycles of hiring and firing in the mortgage operation, showed the hiring of 5,900 full-time workers in nine months of 2010. It then cut 5,000 employees over the next six months before hiring 7,000 over the next 15 months through the third quarter of 2012, according to the presentation.
Wells Fargo accounted for almost 1 in 3 U.S. home loans last year, according to Inside Mortgage Finance, a trade publication.