Despite long being the #1 mortgage lender in the country, Wells Fargo has announced plans to shrink its mortgage business.
The San Francisco-based bank said it will exit its correspondent lending business, while focusing more on bank customers and minority communities.
Additionally, the company will reduce the size of its loan servicing portfolio, in which it collects monthly payments from homeowners.
As a result, the company will significantly reduce its mortgage footprint, which had been the largest prior to the rise of Rocket Mortgage.
In the fourth quarter of 2017, Quicken Loans unseated Wells Fargo and basically never looked back. They changed their name to Rocket Mortgage in May 2021.
Wells Fargo Exits Correspondent Lending
First things first, Wells Fargo is exiting the correspondent mortgage lending business, which is basically the resale of their loan products by third-party companies like credit unions.
These smaller entities “originate, underwrite and close mortgage loans before selling them to Wells Fargo Funding,” their website states.
Per HMDA data from Richey May, Wells Fargo funded roughly $228.6 billion in home loans in 2021(most recent year available).
Of that total, about $69 billion, or 30%, was via the correspondent lending channel.
It shows another $11 billion, or five percent, originated via the wholesale lending channel, which is reserved for mortgage broker partners.
But Wells Fargo had exited wholesale lending back in 2012, so it’s unclear if that number is accurate.
In any case, they were the second largest mortgage lender in the United States in 2021, behind Rocket Mortgage’s $343 billion.
If we subtract the $69 billion in correspondent lending, their total would drop to around $160 billion. We can ignore the wholesale numbers for now.
That would make Wells Fargo the fourth largest mortgage lender, behind Rocket, United Wholesale Mortgage, and Chase.
So still quite large, even without the third-party origination volume. But wait, there’s more.
Wells Fargo Mortgage to Focus on Bank Customers and Minorities
While a CNBC article indicated Wells Fargo would “only make home loans to bank clients and minority borrowers,” that appears to be incorrect.
However, the company did say it “plans to create a more focused Home Lending business aimed at serving bank customers, as well as individuals and families in minority communities.”
They also refer to this new strategy as a “smaller, less complex business,” which might spell additional mortgage layoffs and reduced loan volumes.
It’s unclear how focused they plan to get and/or how much smaller, but it’s clear they’re going to take a more calculated approach
This includes “optimizing” their retail team to focus mostly on existing bank customers and underserved communities.
To that end, they will deploy additional home mortgage consultants in local minority communities, while investing $100 million “to advance racial equity in homeownership.”
The company will also expand its Special Purpose Credit Program (SPCP) that assists minority homeowners.
Wells Fargo noted back in April 2022 that it was the top mortgage lender for “Black families” and the top refinance lender for Black homeowners.
In fact, in 2020 the company apparently extended roughly the same number of home purchase loans to Black families as the next three largest bank-lenders combined.
Can Anyone Still Get a Mortgage from Wells Fargo?
As mentioned, Wells Fargo announced plans to significantly shrink their home lending business.
At the same time, they will focus more on existing bank customers and minority communities.
However, this doesn’t mean you can’t get a mortgage from Wells Fargo if you don’t fit the above categories.
It just might mean that you won’t be receiving incoming emails or phone calls from home mortgage consultants at Wells Fargo.
It may also mean that those who do fit the categories above may be eligible for special offers and pricing from the bank.
Lastly, if you’re an existing loan servicing customer, it’s possible your loan might be transferred to a new loan servicer.
So keep an eye out for any changes to ensure future mortgage payments are routed to the right place.
Overall, this news doesn’t come as a huge surprise given Wells Fargo’s struggles of late in the home lending space, including alleged improper lock fees.
And given the overall climate in the mortgage space at the moment, it’s not really a shocker to see any company scaling back.