Wells Fargo Narrows Focus of Home Lending Business

Wells Fargo is shrinking and simplifying its home lending business.

The business will now focus on bank customers and minority communities, while the bank exits the correspondent business and reduces the size of its servicing portfolio, Wells Fargo said in a Tuesday (Jan. 10) press release.

“Mortgage is an important relationship product, and our goal is to continue to be the primary mortgage lender to Wells Fargo bank customers as well as minority home buyers,” Wells Fargo CEO of Consumer Lending Kleber Santos said in the release. “We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus.”

Wells Fargo is among the banks that have been increasing their loan-loss reserves due to the situation and outlook of the economic concerns and activities in the U.S.

With loan demand at a high, banks are readying for the possibility that rising interest rates will mean credit losses.

The changes Wells Fargo announced Tuesday come about three weeks after the Consumer Financial Protection Bureau (CFPB) levied a $3.7 billion fine on the bank for its handling of loans and banking programs.

According to the CFPB, the penalty stemmed from Wells Fargo’s illegally assessing fees and interest charges on loans, wrongful car repossessions and unlawful overdraft fees.

About four years earlier, in 2018, the bank paid $1 billion after the CFPB accused it of overcharging on mortgages and tacking insurance costs and fees onto some auto loans through a mandatory insurance program.

Wells Fargo also plans to optimize its retail team to focus on bank customers and underserved communities, invest an additional $100 million to racial equity in homeownership and hire and deploy more home mortgage consultants in minority communities, according to its Tuesday press release.

The bank will also broaden the existing investment from its Special Purpose Credit Program (SPCP) to include purchase loans. Announced in April, the SPCP had been focused on lowering rates for customers who were refinancing, the release said.

“We will continue to expand our programs to reach more customers in underserved communities by leveraging our strong partnerships with the National Urban League, UnidosUS and other non-profit organizations,” Kristy Fercho, head of home lending and head of diverse segments, representation and inclusion at Wells Fargo, said in the release.