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Once upon a time, it was more or less Wells Fargo’s entire business model to accumulate accounts at essentially any cost—and the cost was, indeed, significant, in more ways than one. Now, it is more interested in getting rid of as many accounts and customers as possible. And that includes the bank’s former pride and joy, its once market-leading mortgage business. And so, if for some reason you would like a home loan that comes with all sorts of improper extra costs and a higher likelihood of an improper foreclosure, you’re out of luck—even if you aren’t Black.
Its executives are sketching plans that would curb new lending and related businesses such as loan servicing. One senior executive said it would be surprising if Wells Fargo’s mortgage business ends up as large as what JPMorgan Chase & Co.’s is today.
Well, that’s definitely one way Charlie Scharf can make himself feel a bit more at home at Wells.
Retrenching will almost certainly include paring, or potentially even halting, so-called correspondent mortgage lending, in which Wells Fargo provides funding for loans arranged by outsiders, the people said…. A concern inside Wells Fargo is that when it finances large amounts of loans from other firms, it’s on the hook for any reputational damage if problems later surface….
Down the road, the bank’s third-party servicing business — which oversees billing and collections for some $700 billion in loans made by other lenders — will also shrink…. In one sign of the firm’s evolving philosophy, executives are already under orders to improve handling of applications from existing consumer-banking and wealth-management clients, rather than refer them to the same system used by non-customers.
These plans, such as they are, will also—along with the general inflation-induced slowdown in the mortgage business—help Wells out with its headcount problem.
Job cuts inside Wells Fargo are already underway as the Federal Reserve’s interest-rate hikes slow applications. Insiders acknowledge those headcount reductions ultimately will go deeper as the firm recalibrates its size.
Wells Fargo Plans Major Retreat From Mortgage Business It Long Dominated [Bloomberg]
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