Reacting to rocky market conditions, Wells Fargo Bank is pulling out of mortgage originations and laying off 450 employees.
The San Francisco-based bank joins a growing list of companies pulling out of entire sectors of the home-loan business. With interest rates rising and consumer demand falling, these lenders are finding competition to be vicious.
"The mortgage industry is operating with substantial excess capacity, and loan pricing is depressed," said Jim Ketcham, a Wells Fargo executive vice president. He added that the bank was unwilling to make the investment necessary to gain economies of scale.
Wells is not withdrawing from mortgages completely. It is looking to handle originations through an alliance with a nationwide lender. It will hang on to its $9.1 billion mortgage servicing portfolio, and will continue to originate home equity loans.
With prospects dim for an upturn in the market, Bank of New York Co. is liquidating its mortgage banking unit, Arcs Mortgage Corp.
And Keycorp is planning to lay off 250 employees of mortgage divisions that acquire loans through other lenders and brokers. Both Keycorp and Bank of New York sought bidders for their units but failed to find buyers.
Industrywide mortgage originations, which reached a record $1 trillion in 1993, are likely to fall to about $650 this year, economists say. As a result, few lenders are originating mortgages as a profit.
The mortgage division at Wells is "talking with a number of potential alliance partners who would assume responsibility for originating first mortgages for the bank's customers," Mr. Ketcham said. An agreement is expected in four to six weeks, according to a bank spokesman.
Meanwhile, the 450 jobs will be eliminated today, all in California. The cuts will affect loan originators, processors, and support personnel.
"This has been a difficult decision to make," said Mr. Ketcham. "But in the long term, an alliance with a leading provider of first mortgages will provide a great benefit to our customers because they will have access to a wider range of competitively priced mortgage products."
A bank spokesman would not specify whether loans would be originated by a third party through the bank's branches or if customers would be referred to a lender at another site.
Wells Fargo originated $2.7 billion of home loans in 1994.
