Cuts are mostly in Wells Fargo's "fulfillment division" according to company spokesman Josh Dunn speaking of the 2,323 eliminated positions in August as reported in The Charlotte Observer. The fulfillment division is responsible for the processing of applications for "mortgages and refinancings."
WFC is trading intraday, at time of this writing, down 0.39% to $40.41 not far off its 52 week high of $44.78 on fairly average volume of 13,404,504. This action was noticed during President Obama's one-hour plus press conference (Tuesday) addressing the government shutdown.
Interest rates on the rise have significantly stymied the home mortgage refinancing industry, which had been seeing an increase in business as homeowners rushed to take advantage of artificially low rates. In fact, large banks like Wells Fargo and Bank of America Corp (BAC) have laid off thousands over the past three months. JP Morgan & Co (JPM) is also feeling the heat (in more ways than just diminishing mortgage refinancing, but that heat will remain outside the scope of this article.)
Wells Fargo will try to find other roles for the affected workers who are "in good standing," said WFC spokeswoman Christine Shaw in the more recent Charlotte Observer article.
"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."
The sweeping mortgage layoffs are fresh on the heels of recent growth in big banks' mortgage divisions. The largest U.S. banks hire thousands of loan processors and underwriters when interest rates are encouraging enough for people to refinance.
Bank of America, the nation's second largest bank (first largest by deposits) and third largest mortgage lender, has already given notice to 2,100 workers in their mortgage and refinance departments with more being planned as a climate of uncertainty continues, with 1,000 such layoffs occurring in the Cleveland, Ohio area alone.
BAC workers in Ohio, Florida and Virginia received notice of layoffs in late August, The Cleveland Plain Dealer reported according to Reuters.com. Applications to refinance mortgages have dropped 63 percent since peaking in early May, according to the Mortgage Bankers Association refinance index.
However, according to global outplacement firm Challenger Gray & Christmas, Bank of America is now the employer with the largest U.S. layoff announcement this year according to an ABC News report, as the bank, trying to break free from a pile of bad mortgages and a sagging stock price, announced plans to lay off 30,000 employees over the next few years.
According to The Wall Street Journal, Bank of America will cut 6,000 jobs by the end of this year.
In a statement released by Bank of America in September, its goal is "not a given number of job reductions," but to focus "all of its resources on serving individuals, companies, and institutional investors," adding that it will cut $5 billion in costs.
BAC is trading intraday, at time of this writing, down 0.40% to $13.77 at a fairly lighter level than its average volume.
JP Morgan plans to cut hundreds of mortgage related jobs each in Phoenix, AZ, San Diego, CA, Detroit, MI. (with its mortgage office in Troy, MI. being completely shuttered) Chicago and Downers Grove, IL and in the Dallas, Texas area among other areas citing the same problem as its peers.
JPM is trading intraday at time of this writing down 1.54% to $50.98 on a tad less than average volume.
Interest rates have risen, and demand for refinancing mortgages has fallen off sharply. Though home sales have increased, the rise in volume has not been sufficient to offset the decline in mortgage and refinancing applications.
It is important to note however, on the mention above of "home sales" increasing: It is this writer's observation that Blackstone Group LP (BX), the largest U.S. private real estate owner, accelerated purchases of single-family homes as prices jumped faster than it expected according to a report on Bloomberg.com.
In fact, Blackstone is now the largest investor in single-family homes to manage as rentals, acquiring 16,000 properties worth $2.5 billion in nine markets, from Miami to Phoenix, where prices surged 22 percent in the 12 months through October. The firm, along with Two Harbors Investment Corp (SBY), is seeking to transform a market dominated by small investors into a new institutional asset class that JP Morgan estimates could be worth as much as $1.5 trillion.
Good advice is buyer beware and investors engage in due diligence.