Banking giant shrinks mortgage business to "reduce risk" and "narrow focus" on consumer and minority lending
Wells Fargo is taking its home lending in a “new strategic direction,” pivoting to a “smaller, less complex business focused on bank customers and minority communities,” the bank said Tuesday.
After paying $3.7 billion over consumer law violations, the mortgage banking giant announced plans to create a “more focused” home lending business by downsizing its servicing portfolio and exiting the correspondent channel.
“Mortgage is an important relationship product, and our goal is to continue to be the primary mortgage lender to Wells Fargo bank customers as well as minority homebuyers. We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus,” said Kleber Santos, CEO of consumer lending at Wells Fargo. “As the largest bank lender to Black and Hispanic families for the last decade, we remain deeply committed to advancing racial equity in homeownership.”
These plans, which have been in the works for the past three years, aim to advance racial equity and “provide flexibility to address customer needs more quickly.” Wells Fargo said it will replace minority homeownership lending commitments it made seven years ago and expand its existing $150 million Special Purpose Credit Program (SPCP). Initially focused on lowering customer refinancing rates, the program will now include purchase loans.
The bank “expects to make ongoing investments in this area” in the coming years. This includes investing an additional $100 million to advance racial equity in homeownership, including strategic partnerships with non-profit organizations and community-focused engagements.
Kristy Fercho, head of Wells Fargo Home Lending and head of diverse segments, representation, and inclusion, said they will hire additional mortgage consultants in communities of color.
“We will continue to expand our programs to reach more customers in underserved communities by leveraging our strong partnerships with the National Urban League, UnidosUS and other non-profit organizations,” Fercho said.
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