Facing steep declines in its mortgage refinancing business, Wells Fargo has eliminated more than 750 Twin Cities jobs and several thousand nationwide from its home lending operations over the past four months.
The largest U.S. mortgage lender is grappling with a sharp rise in interest rates, which has drastically reduced its once-robust home refinancing business. Loan activity has been “below what we experienced throughout 2012 and early 2013,” the company said in an e-mail Thursday.
Wells Fargo, one of Minnesota’s largest employers, said Wednesday that it had eliminated another 102 jobs, the fourth round of cuts since July 1.
Across the country, other banks have been making similar cuts. Atlanta-based SunTrust Banks said this week that it plans to eliminate 800 positions. Earlier this month, PNC Financial Services Group said it was laying off 7 percent of its mortgage operations. Bank of America has also laid off thousands.
Wells Fargo has more than 20,000 Minnesota employees, including about 8,000 who work in various segments of the mortgage business. Spokeswoman Peggy Gunn said Wells Fargo would try to absorb some of the laid-off workers into other areas of the company, but did not say if any had been retained.
Since the spring, interest rates have risen a full percentage point, causing a steep drop in mortgage refinancings, which surged when rates hit near-record lows more than a year ago.
Lenders are also bracing for more moderate growth as higher rates threaten to slow home sales.
The latest cuts are no surprise to Robert Hignite, a seasoned mortgage processor and manager. During his 16 years in the business, he’s held jobs with Wells Fargo and other companies. He said mortgage workers must always be ready for a pink slip.
“That’s just the nature of the industry,” Hignite said. “You can be here today, gone tomorrow.”
For him, upheaval came this summer after mortgage rates, after hovering near record lows for nearly a year, rose a full percentage point to about 4.5 percent, costing him his job at a local mortgage processing company.
“Memorial Day week I worked 110 hours,” said Hignite, who is still unemployed. “But by Labor Day there were no files to be done.”
Despite the recent layoffs, there were still 20,000 more mortgage-related jobs nationwide than last year, though nearly 40 percent fewer than when the market peaked in 2006, according to the Bureau of Labor Statistics.
Wells Fargo and other lenders have learned to be nimble, relying on temporary workers and job cuts to quickly adjust to market changes. Earlier this month, despite the mortgage downturn, Wells reported record third-quarter net income.
Wells Fargo’s chief financial officer, Tim Sloan, acknowledged to investors that mortgage banking revenue was lower in the quarter due to the rise in interest rates.
Wells Fargo originated $80 billion worth of mortgages in the third quarter — a decline of 29 percent from the prior quarter and 42 percent from the third quarter of 2012.
During a discussion of quarterly results with analysts last week, Sloan said that the company had yet to realize much of the projected savings from job cuts because it gives employees lengthy notice and the opportunity to seek other jobs in the firm. He suggested that Wells executives continue to scrutinize employment levels in the mortgage business.
“You should begin to see reduction in expenses more significantly during the fourth quarter and we will continue to manage our capacity based on demand,” he said.
Staff writer Steve Alexander contributed to this report.