Wells Fargo & Co., which makes one out of every five U.S. home mortgages, is laying off 356 people from its home mortgage division across the country as rising interest rates cut into refinance activity.
The cuts include 34 people in Minneapolis and 58 in Des Moines, where the bank's home mortgage division is based. All employees were notified last week, the company confirmed Monday.
About 8,500 of Wells Fargo's nearly 20,000 employees in Minnesota work in its home mortgage division.
The trims come as mortgage lenders wrestle with rising interest rates and a shifting landscape for home loans. Long-term rates, including those on home loans, have risen in reaction to Fed Chairman Ben Bernanke's hints that the Federal Reserve will pull back on the massive $85 billion a month bond buying program it has been running to hold rates down and stimulate the economy.
The average rate on a 30-year fixed rate mortgage Monday was about 4.35 percent, according to BankRate.com. Two months ago it was about 3.7 percent.
The surge nicked the San Francisco-based lender's second-quarter profits of $5.52 billion, with its mortgage banking income sliding 3 percent from last year. While Wells Fargo executives were bullish about the country's improving housing market during an earnings call with industry analysts, they warned about coming declines in mortgage refinance volumes.
Guy Cecala, CEO and publisher of Inside Mortgage Finance, said his best guess is that refi volumes will probably drop about 30 percent with home purchase volumes rising about 20 percent, translating into an 18 percent decline in total mortgage originations in the second half of the year.
"A lot depends on what happens to mortgage rates, but the recent (last week) drop in rates suggests that the big jump in rates we saw in June may not hold up or necessarily signal further increases in the short term," Cecala said in an e-mail.
A Wells Fargo Home Mortgage spokeswoman on Monday said mortgage rates remain low by historical standards but the appetite for mortgage refinancings has slowed from 2012.
"After evaluating the current market and our business needs, we are reducing staff to better align and increase the efficiency of our loan processing centers," Vickee Adams said in a statement.
Adams said the company is trying to find other jobs at Wells Fargo for the affected employees.
The staffing trims come even as the San Francisco-based bank builds up other areas of its mortgage operation. In April, Wells Fargo broke ground on a $100 million addition to its mortgage campus in West Des Moines called the Jordan Creek Campus.
The addition is slated to be complete in two years and will have enough room to house about 1,800 workers.
In Minneapolis, Wells Fargo is expected to be the owner and main tenant of two new office towers in the works as part of a $400 million development next to the new Vikings stadium, but the company hasn't yet made a public commitment.
But the bank is not alone in paring back refinancing operations. On July 15, Citigroup announced it was closing a facility in Danville, Ill., that opened in January of last year, affecting about 120 employees.
"The Danville facility was originally established to handle the surge in demand for refinancing; however, due to the ongoing decline in refinance volumes, the excess capacity Danville provided is no longer needed," the company said in a statement.