Wells Fargo & Co., the largest U.S. home lender, said competition in the mortgage market is “essential” and that its control of 1 in 3 U.S. mortgages is the result of doing a better job than rivals.
Growth in market share isn’t “magic” and is driven by clients choosing the bank over competitors because it has served them well, San Francisco-based Wells Fargo said in a memo sent last week to mortgage employees. The bank said it issued the two-page, unsigned document amid “discussion about Wells Fargo’s prominence” in the market. The document was confirmed by Tom Goyda, a bank spokesman.
“In a free economy, competition is essential,” the bank said. “We believe customers must have choices in where they bring their lending business.”
Regulators and lawmakers have said that Wells Fargo’s control of mortgage lending and servicing could hurt consumers and undermine markets. A setback or strategy shift at Wells Fargo or other large mortgage firms could choke off credit for homebuyers, said David Stevens, chief executive officer at the Mortgage Bankers Association and a former official in the U.S. Department of Housing and Urban Development.
“The nation benefits from a broadly distributed mortgage-finance system,” Stevens said in an interview this month.
Wells Fargo, run by CEO John Stumpf, 58, controlled 33.1 percent of the origination market through the first six months of the year, according to Inside Mortgage Finance, an industry publication. In mortgage servicing, which involves billing and collections, Wells Fargo is also No. 1, with 18.5 percent.
Wells Fargo fell 10 cents to $34.28 at 12:10 p.m. in New York. The stock have gained 25 percent this year, better than the 20 percent rise in the 24-company KBW Bank Index.
The lender’s market share drew warnings from the inspector general for Fannie Mae and Freddie Mac, the head of Ginnie Mae, Fitch Ratings and congressmen, including one from the bank’s home state.
“Market share for us is not a goal, it’s not the be-all, end-all that we strive for,” Mike Heid, chief of the bank’s mortgage business, said May 22 at the company’s investor day in New York.
Wells Fargo’s stance, reiterated in the memo, is that it does a better job than rivals and benefits as companies scale back or exit the business and as market conditions discourage newcomers.
“Serving customers very well means that more customers and clients choose us and reward us with their business,” the bank said in the memo. “Doing this better than any other home lender gets measured as market-share growth.”
As recently as the 1990s, a company with 7 percent market share would have been considered a large player, Stevens said. Countrywide Financial Corp., whose lax underwriting has been blamed for helping to fuel the housing crisis, led the market in 2007 with about 17 percent.
“There was a time years ago when Angelo Mozilo at Countrywide stated that his goal was to have 25 percent market share,” Stevens said, referring to the firm’s former CEO and co-founder. “Everyone dropped their jaws when he said that. It was considered way too big.”
Goyda said the memo is an example of communications sent regularly to Wells Fargo employees.
“We believe it’s important for team members to be informed and educated about market and business developments,” he said yesterday in a phone interview.
Wells Fargo managers in the San Francisco Bay Area at a January sales event urged retail loan officers to reach for 40 percent of the new-home purchase market, according to two attendees who asked that their names not be used because they weren’t authorized to speak publicly. Some of the managers dressed as cowboys, six shooters strapped to their hips.
The bank has funded 6.4 million mortgages in the 3 1/2 years since the housing crisis began, the document shows. It originated $131 billion in mortgages in the second quarter, leading to a record $2.89 billion in mortgage-banking income.
“As time goes on, market share may go up or down,” Wells Fargo said in the memo. “But whatever the environment, our focus will be the same.”