Hugh Son, CNBC, January 10, 2023
Wells Fargo is stepping back from the multitrillion-dollar market for U.S. mortgages amid regulatory pressure and the impact of higher interest rates.
Instead of its previous goal of reaching as many Americans as possible, the company will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities, CNBC has learned.
Dual factors of a lending market that has collapsed since the Federal Reserve began raising rates last year and questions about the long-term profitability of the business led to the decision, said consumer lending chief Kleber Santos. Regulators have heightened oversight of mortgage lending in the past decade, and Wells Fargo garnered further scrutiny after its 2016 fake accounts scandal.
“We are acutely aware of Wells Fargo’s history since 2016 and the work we need to do to restore public confidence,” Santos said in a phone interview. “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’s the latest, and perhaps most significant, strategic shift that CEO Charlie Scharf has undertaken since joining Wells Fargo in late 2019. Mortgages are by far the biggest category of debt held by Americans, making up 71% of the $16.5 trillion in total household balances. Under Scharf’s predecessors, Wells Fargo took pride in its vast share in home loans — it was the country’s top lender as recently as 2019 when it had $201.8 billion in volume, according to industry newsletter Inside Mortgage Finance.
Wells Fargo said it was investing $100 million toward its goal of minority homeownership and placing more mortgage consultants in branches located in minority communities.
“Our priority is to de-risk the place, to focus on serving our own customers and play the role that society expects us to play as it relates to the racial homeownership gap,” Santos said.