Wells Fargo Cuts Mortgage Staff As Volume Falls

Wells Fargo & Co. (WFC) cut 1,900 employees in its mortgage business because demand for new mortgages has dropped.

The San Francisco bank, the nation's fourth largest by assets, has given notice last month to mostly interim employees in loan processing, underwriting and servicing working in its operations centers ranging from Minneapolis and Chicago to Wilmington, N.C. Bloomberg News and the Charlotte Observer reported the layoffs earlier.

Wells Fargo has set its sights on cost saving this year, and Howard Atkins, who was chief financial officer until February, told Dow Jones in January the bank is "really trying to...take the next step" in lowering the costs of operating the massive bank. "I don't think there will be any branch closings, but there could be staff reductions," he said.

Layoffs will likely become more widespread at Wells Fargo and in the banking industry overall as banks try to become more efficient and offset weak revenue growth and sluggish loan demand. The mortgage business is particularly cyclical and tied to interest rates that set mortgage rates. Such rates have been rising, and refinancings and home purchases have slowed.

The cuts add up to about 3% of Wells Fargo's mortgage staff, including interim positions that are tied directly to origination volumes. Most of the layoffs are these interim employees, who were told when hired that their position could be short term, a spokesman said. On Dec. 31, Wells Fargo's overall headcount was 272,200.

The bank is expected to report first-quarter results on April 20.

"Industry-wide mortgage applications are down nearly 30% from 2010 averages," Sanford Bernstein analyst John McDonald wrote in a recent analyst report, and Wells Fargo "is managing for significantly lower production volumes in '11." Moreover, Wells Fargo "typically loses some market share in a purchase-driven market, as opposed to the refi-driven markets of 2009 and 2010 when it gained significant share. To cushion the blow, management noted that it is aggressively managing its production capacity [i.e. variable headcount] in 2011 based on its view of origination volumes it will see."

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; [e-mail]