Wells Fargo is stepping back from the multitrillion-dollar market for U.S. mortgages amid regulatory pressure and the impact of higher interest rates. Instead of its previous goal of reaching as many Americans as possible, the company will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities. Ted Rossman, senior industry analyst at Bankrate.com, said Wells Fargo has “been dogged by various regulatory scandals, and it’s also a tough time for the mortgage market right now.”
It’s the latest, and perhaps most significant, strategic shift that CEO Charlie Scharf has undertaken since joining Wells Fargo in late 2019. Mortgages are by far the biggest category of debt held by Americans, making up 71% of the $16.5 trillion in total household balances. Under Scharf’s predecessors, Wells Fargo took pride in its vast share in home loans — it was the country’s top lender as recently as 2019 when it had $201.8 billion in volume, according to industry newsletter Inside Mortgage Finance.
Why it matters
Dual factors of a lending market that has collapsed since the Federal Reserve began raising rates last year and questions about the long-term profitability of the business led to the decision. Regulators have heightened oversight of mortgage lending in the past decade, and Wells Fargo garnered further scrutiny after its 2016 fake accounts scandal.