Wells Fargo Is Suspending Most Of Its Mortgage Services

The real estate market continues to go through a significant shift from the pandemic-era rapid growth in home values to a period of rising interest rates. The National Association of Realtors shares that, over the last year, existing home sales have fallen by 35.4% More so, the median sale price for homes rose 3.5% for the year to $370,700. With consumers seeming to pull away from buying, it's clear that this will impact mortgage lenders in various ways.

Wells Fargo was launched in 1852 to help people build financial health through a variety of lending and banking programs. In October 2022, the company's earnings report indicated Wells Fargo had a net income of $3.5 billion for the year, with $335.6 billion in existing consumer banking and lending in play, about a 1% increase from the previous quarter. The news released today about Wells Fargo's mortgage services, then, seems surprising and may be an indication of the bigger view of the real estate market.

Wells Fargo, which is considered the largest mortgage lender in the U.S., is pulling back from its borrowing services, according to a report from CNBC. The report indicates numerous factors that led to the decision, including regulatory pressure and the Federal Reserve's continued effort to control inflation by increasing interest rates. Thich has negatively impacted the industry by making it harder for consumers to obtain loans due to the higher costs.

CNBC stated that Kleber Santos, Wells Fargo's consumer lending chief, shared there's concern over long-term profitability in the sector, stating, "We are acutely aware of Wells Fargo's history since 2016 and the work we need to do to restore public confidence." He continued, "As part of that review, we determined that our home-lending business was too large, both in terms of overall size and its scope." It appears that the company, which has maintained a goal of reaching as many people as possible in the U.S. over the previous years, is switching gears.

Wells Fargo certainly isn't leaving the industry. Rather, the company is working to adjust the focus of its business, moving towards home loans for its current bank and wealth management customers. It also plans to focus on supporting the needs of minority community borrowers, according to CNBC. As for those with existing loans, no change is expected, and for some, obtaining a mortgage loan through the lender may still be a lucrative opportunity.

The CNBC report further states that Wells Fargo had $201.8 billion in loan volume in 2019 but has since experienced a shift in its strategies with the appointment of Charlie Scharf as the lender's CEO. Scharf is said to be steering the company towards a heavier focus on investment banking and credit card revenue. This will put the company in better alignment with its large rivals. Wells Fargo is also closing down the component of the company that purchases third-party lender loans and reducing its mortgage-servicing portfolio.