Wells Fargo & Co (NYSE: WFC) just revealed plans of trimming its footprint in home lending. Moving forward, it will offer home loans only to existing customers and “minority” borrowers.
Wells Fargo to cut its loan-servicing portfolio
The financial services behemoth also announced an end to its correspondent business and said it will resort to asset sales to shrink its loan-servicing portfolio.
Wells Fargo has been committed to simplifying its business over the past three years. According to Kleber Santos – its Head of Consumer Lending:
As part of that review, we determined that our home lending business was too large, both in terms of overall size and its scope.
The stock market news is particularly significant considering Wells Fargo was once the United States’ biggest mortgage lender. Versus late November, shares of the multinational bank are currently down over 10%.
Rob Sechan reacts to the announcement
It is also noteworthy that peers JPMorgan and the Bank of America had made similar moves following the Global Financial Crisis. Reacting to the announcement, Rob Sechan (NewEdge Wealth) said on CNBC’s “Closing Bell: Overtime”:
“I think it shows the impact of rising rates, causing them to question if the juice is worth the squeeze. They’ve been incredibly focused on quality of their loan portfolio. So, no surprise there. It’s all about risk management.”
Just weeks ago, the Wall Street bank agreed to pay $3.70 billion over mismanagement of auto loans, mortgages, and deposit accounts (source).
Wall Street currently rates the Wells Fargo stock an “overweight” on average.
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