Wells Fargo, once the No. 1 player in mortgages, is stepping back from the housing market – CNBC
Charles Scharf, chief executive officer of Wells Fargo & Co., listens during a House Financial Services Committee hearing in Washington, D.C., U.S., on Tuesday, March 10, 2020.
Andrew Harrer | Bloomberg | Getty Images
Wells Fargo is stepping back from the multi-trillion 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 offer home loans to existing bank and wealth management customers and borrowers in minority communities, CNBC has learned.
The dual factors of a lending market that has collapsed since the Federal Reserve began raising rates last year and heightened regulatory oversight — both industrywide, and specific to Wells Fargo after its 2016 fake accounts scandal — led to the decision, said consumer lending chief Kleber Santos.
“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, according to industry newsletter Inside Mortgage Finance.
More like rivals
Now, as a result of this and other changes that Scharf is making, including pushing for more revenue from investment banking and credit cards, Wells Fargo will more closely resemble megabank rivals Bank of America and JPMorgan Chase. Both companies ceded mortgage share after the 2008 financial crisis.
Following those once-huge mortgage players in slimming down their operations has implications for the U.S. mortgage market.
As banks stepped back from home loans after the disaster that was the early 2000’s housing bubble, non-bank players including <…….