Wells Fargo Fires Mortgage Bankers After Reimbursing Some California Getaways

Wells Fargo laid off hundreds of mortgage bank employees this week as part of a massive layoff triggered by the bank's latest strategy change.

The layoffs were announced on Tuesday and have affected some of the top manufacturers, including several bankers who took out loans that exceeded $100 million last year and attended an insider sales meeting for recent successful people, according to sources familiar with the situation. 

Under CEO Charlie Scharf, Wells Fargo is giving up parts of the US mortgage market that it once dominated.

Instead of seeking to maximize its share of American home loans, the bank is focusing mostly on serving existing customers and minority communities. The shift comes after sharply higher interest rates led to a collapse in loan volumes, forcing Wells Fargo, JPMorgan Chase and other firms to cut thousands of mortgage positions in the past year.

Those cut this week at Wells Fargo included mortgage bankers and home loan consultants, a workforce spread around the country, who are compensated mostly on sales volume, according to the people, who declined to be identified speaking about personnel matters.

The company cut bankers who operated in areas outside of its branch footprint and who therefore didn’t fit in the new strategy of catering to existing customers, the people said. Those cuts include bankers across the Midwest and the East Coast, one of the people said.

Some of those people were successful enough last year to be flown to a resort in Palm Desert, California, for a company-sponsored conference earlier this month. Palm Desert is a luxury enclave known for its warm weather, golf courses and proximity to Palm Springs.

It’s common practice in finance to reward top salespeople with multiday events held in swanky resorts that combine recognition, recreation and educational sessions. For instance, JPMorgan’s mortgage division is holding a sales conference in April.

A Wells Fargo spokeswoman said the bank has communicated with affected employees, provided severance and career guidance, and tried to retain as many workers as possible.

“We announced in January strategic plans to create a more focused home-lending business,” she said. “As part of these efforts, we have made displacements across our home-lending business in alignment with this strategy and in response to significant decreases in mortgage volume.”

The bank will also continue to serve customers “in any market in the United States” through its centralized sales channel, she added.

While this latest round of cuts wasn’t based on employees’ performance, Wells Fargo has also been cutting mortgage workers who don’t meet minimum standards of production.

In areas with expensive housing, that could be a minimum of at least $10 million worth of loans over the past 12 months, said one of the sources.

The bank said last month that mortgage lending continued to decline in the fourth quarter, down 70% to $14.6 billion. Wells Fargo said it had nearly 11,000 fewer employees at the end of 2022 than in 2021. One source said the January mortgage announcement was causing recruiters to poach the best talent.

Scharf addressed staff in January at a town hall meeting on the 25th, he reiterated his rationale for the mortgage cut.