Wells Fargo No Longer Giving Out Mortgages Due To Past Scandals?
Wells Fargo will significantly step back from granting mortgages due to intense regulatory troubles that the bank is working through, including a $1.7 billion fine it was charged for mishandling consumer accounts.
Banking giant Wells Fargo, known for giving out mortgages, is freezing any leading options for the foreseeable future. The reason for their massive step back from the forefront of the financial scene is due to being inundated with scandals.
They have decided to focus on their customers and any banking needs they might have over the acquisition of new customers. It will also reduce how many properties it has in its mortgage servicing portfolio.
Along with reducing its mortgage services, Wells Fargo will also cancel any correspondent business that it is involved in. The correspondent business consists in buying loans from other lenders and essentially taking on the responsibility of the debt.
Since, Well Fargo is considerably reducing their services, it is only natural that it will reduce the number of staff employed. However, the bank has not made any statement about layoffs or its employees. Their spokesperson declined to give any comment on the subject.
Wells Fargo’s head of consumer lending stated that they would continue to support the mortgage customers they already have and maybe some small lending in the future. But there was no statement on whether this step back from lending was a temporary measure or permanent.
The reduction of leading opportunities from Well Fargo is due to the bank being in trouble with its regulators. At the end of 2022, the leading institution was fined over $1.7 billion by the Consumer Financial Protection Bureau. This fine was issued due to the widespread mismanagement of millions of customer accounts.
Wells Fargo’s public image is one of the reasons that they decided to step back from leading until customers have regained confidence in their abilities. When reviewing their business plan, they realized that the mortgage sector of their business was too big and needed to be redesigned.
Also, the spike in interest rates has caused a very volatile market for both real estate agents and leading institutions.
Several financial analysts think this step back from the lending process is a good move for Wells Fargo, as the bank has been at the center of many regulatory scandals over the last few years. In 2017, Quicken Loans beat Wells Fargo as America’s number one mortgage lender.
Wells Fargo is not the first banking institution to reduce their services. Bank of America and Chase also had to rethink what services they were going to offer after the financial crisis of 2008. They moved into lending money through trading and credit cards and less through mortgages and loans.
The landscape of mortgage lending has changed significantly over the last few years. The pandemic, inflation, the cost of living crisis, and the Ukrainian war are causing havoc with the economy. In turn, this is causing people to be very cautious when spending their money. Since the Federal Reserve is increasing interest rates to try and combat the rising inflation rates, it has brought lending to a standstill. It may be the perfect time for Wells Fargo to leave the mortgage and lending game.
