Wells Fargo will lay off 150 workers in the Charlotte region and nearly 1,900 across the country as the company’s home mortgage refinancing business slows, the bank said Wednesday. The cuts mark another wave of nationwide layoffs at the largest U.S. mortgage lender.
Rising interest rates have dramatically slowed home mortgage refinancing activity across the industry, which had boomed as homeowners sought to lock in historically low rates. In response, big banks like Wells Fargo and Bank of America have laid off thousands over the past three months.
Wells Fargo’s Wednesday job cuts follow 284 layoffs in Charlotte and 2,300 nationwide announced by the bank late last month. At nearly the same time, Bank of America laid off more than 2,000 workers across the country in its mortgage unit.
Such layoffs are likely to continue through the end of the year as banks adapt to the new mortgage environment, bank executives and analysts have said. A top executive at BB&T, the No. 3 bank in the Charlotte market, also said Wednesday that a “right-size” is likely at that bank at the start of next year.
“You’ll see that this will be a many-month endeavor for these large and smaller firms to basically restructure their organizations,” said Clifford Rossi, executive-in-residence at the University of Maryland’s Robert H. Smith School of Business. “We could see this ongoing for certainly the remainder of the year and into the beginning of the next year.”
Wells Fargo spokeswoman Christine Shaw said the 150 workers were among 1,865 company employees across the country who were given 60-day notices Wednesday. In Raleigh, 48 workers received notices Wednesday, she said.
She said the majority of the employees worked as mortgage-loan processors. “There’s a need to continue to right-size that business,” she said.
She declined to specify where the affected workers were employed in Charlotte. A source told the Observer some work in Wells’ Customer Information Center in the University City area.
Wells will try to find other roles for affected workers who are “in good standing,” Shaw said.
“These are wonderful employees,” she said. “It’s not a reflection on their performance. It’s what we’re seeing in the industry right now.”
Industry in transition
The large-scale mortgage layoffs come after two years of rapid growth in big banks’ mortgage operations. The largest U.S. banks are known for hiring thousands of loan processors and underwriters when interest rates encourage people to refinance.
For example, Wells Fargo took on about 10,000 new mortgage workers over a 21-month period between mid-2011 and early 2013, Chief Financial Officer Tim Sloan told investors at a conference last week.
But mortgage rates have risen more than a percentage point since May, according to data from the Mortgage Bankers Association. That has cut refinance demand dramatically and led banks to quickly cut costs.
“This is the nature of the beast for the mortgage banking business,” Rossi said. “You expand and contract.”
BB&T layoffs next?
BB&T has so far largely been immune from the wave of mortgage-related layoffs that has affected banks across the industry -- but that’s set to change in first part of next year, Chief Financial Officer Daryl Bible told investors Wednesday.
The Winston-Salem bank’s mortgage business has slowed at a pace comparable to its peers. Where two-thirds of BB&T’s mortgage activity had come from refinances, those are now projected to make up only 30 percent this quarter, Bible said. Total mortgage volume is set to fall between 10 and 15 percent, and applications are down 30 percent.
But that decline so far hasn’t translated into layoffs, as it has at Wells Fargo and Bank of America. That’s because BB&T is in the middle of a large-scale restructuring of its mortgage operations. Before, a huge chunk of its mortgages were originated out of its retail branches. The bank now wants to move all the loan origination into its mortgage banking unit, to make it easier to comply with new regulations from the Consumer Financial Protection Bureau, Bible said.
"We are going to get through this transition first, and probably be a quarter or two behind from some of our peers," Bible told investors at the conference in Boston. He said the bank would start to “right-size our business” around the first half of 2014.
Dunn: 704-358-5235; Twitter: @andrew_dunn Roberts: 704-358-5248; Twitter: @DeonERoberts
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