Wells Fargo to Exit Correspondent, Shrink Mortgage Enterprise, Concentrate on Financial institution Shoppers and Minority Debtors

Regardless of lengthy being the #1 mortgage lender within the nation, Wells Fargo has introduced plans to shrink its mortgage enterprise.

The San Francisco-based financial institution said it can exit its correspondent lending enterprise, whereas focusing extra on financial institution prospects and minority communities.

Moreover, the corporate will scale back the scale of its mortgage servicing portfolio, during which it collects month-to-month funds from owners.

Consequently, the corporate will considerably scale back its mortgage footprint, which had been the biggest previous to the rise of Rocket Mortgage.

Within the fourth quarter of 2017, Quicken Loans unseated Wells Fargo and principally by no means seemed again. They changed their name to Rocket Mortgage in Could 2021.

Wells Fargo Exits Correspondent Lending

First issues first, Wells Fargo is exiting the correspondent mortgage lending enterprise, which is principally the resale of their mortgage merchandise by third-party firms like credit score unions.

These smaller entities “originate, underwrite and shut mortgage loans earlier than promoting them to Wells Fargo Funding,” their web site states.

Per HMDA knowledge from Richey May, Wells Fargo funded roughly $228.6 billion in residence loans in 2021(most up-to-date yr out there).

Of that complete, about $69 billion, or 30%, was by way of the correspondent lending channel.

It reveals one other $11 billion, or 5 %, originated by way of the wholesale lending channel, which is reserved for mortgage broker companions.

However Wells Fargo had exited wholesale lending again in 2012, so it’s unclear if that quantity is correct.

In any case, they have been the second largest mortgage lender in the US in 2021, behind Rocket Mortgage’s $343 billion.

If we subtract the $69 billion in correspondent lending, their complete would drop to round $160 billion. We will ignore the wholesale numbers for now.

That might make Wells Fargo the fourth largest mortgage lender, behind Rocket, United Wholesale Mortgage, and Chase.

So nonetheless fairly massive, even with out the third-party origination quantity. However wait, there’s extra.

Wells Fargo Mortgage to Concentrate on Financial institution Prospects and Minorities

Whereas a CNBC article indicated Wells Fargo would “solely make residence loans to financial institution purchasers and minority debtors,” that seems to be incorrect.

Nonetheless, the corporate did say it “plans to create a extra centered House Lending enterprise geared toward serving financial institution prospects, in addition to people and households in minority communities.”

In addition they confer with this new technique as a “smaller, much less complicated enterprise,” which could spell further mortgage layoffs and lowered mortgage volumes.

It’s unclear how centered they plan to get and/or how a lot smaller, but it surely’s clear they’re going to take a extra calculated strategy

This consists of “optimizing” their retail group to focus totally on current financial institution prospects and underserved communities.

To that finish, they are going to deploy further residence mortgage consultants in native minority communities, whereas investing $100 million “to advance racial fairness in homeownership.”

The corporate can even develop its Particular Goal Credit score Program (SPCP) that assists minority owners.

Wells Fargo famous again in April 2022 that it was the highest mortgage lender for “Black households” and the highest refinance lender for Black owners.

The truth is, in 2020 the corporate apparently prolonged roughly the identical variety of residence buy loans to Black households as the subsequent three largest bank-lenders mixed.

Can Anybody Nonetheless Get a Mortgage from Wells Fargo?

As talked about, Wells Fargo introduced plans to considerably shrink their residence lending enterprise.

On the identical time, they are going to focus extra on current financial institution prospects and minority communities.

Nonetheless, this doesn’t imply you’ll be able to’t get a mortgage from Wells Fargo in case you don’t match the above classes.

It simply would possibly imply that you just gained’t be receiving incoming emails or cellphone calls from residence mortgage consultants at Wells Fargo.

It could additionally imply that those that do match the classes above could also be eligible for particular gives and pricing from the financial institution.

Lastly, in case you’re an current mortgage servicing buyer, it’s doable your mortgage is likely to be transferred to a brand new loan servicer.

So maintain a watch out for any adjustments to make sure future mortgage funds are routed to the appropriate place.

Total, this information doesn’t come as an enormous shock given Wells Fargo’s struggles of late within the residence lending house, together with alleged improper lock fees.

And given the general local weather within the mortgage house in the meanwhile, it’s not likely a shocker to see any firm scaling again.