Following reports in August that Wells Fargo would be laying off about 2,300 workers – most of them in its mortgage servicing division – the mega bank announced on Thursday it would be laying off up to 1,800 additional workers.
Wells Fargo has already sent 60-day notices to the affected workers, who are spread across the country, according to a CNBC report. The letters reportedly cite a decline in mortgage originations and refinancing as the cause of the layoffs.
Chief Financial Officer Timothy Sloan reported on Sept. 9 that the bank was forecast to originate about $80 billion in home loans in the third quarter, down 29% from the second quarter.
‘After evaluating the current market and our business needs, we are responding to this change in demand and to better align and increase the efficiency of our organization,’ Wells Fargo spokesperson Kate Pulley said in a statement.
Mortgage rates have been bobbing up and down in recent weeks but overall have been on the rise since June. On Wednesday, the Federal Reserve announced that would maintain the current pace of its bond-buying, sending yields lower and setting up conditions for rates to decline again.
The layoffs at Wells Fargo are part of an overall trend among mega banks that are rapidly scaling back their mortgage servicing operations in response to dwindling refinancings. During the first half of this year, refinancings accounted for about 70% of the mortgage market, however in recent weeks they have slid to about 50% of applications.
In addition, some banks are getting out of servicing altogether, due to increasing regulatory compliance challenges.
Last month, Wells Fargo announced that its joint venture subsidiary, Wells Fargo Ventures, would be withdrawing from its eight joint ventures in mortgage lending, due to regulatory changes that resulted in increased complexity in operating joint ventures.