Wells Fargo recently announced that they were going to be cutting out 1900 positions in their refinance department. Jobs to be eliminated include loan processors and other staff members that assisted with home loans. Wells Fargo is the largest US home lender and during the refinancing boom they went on a hiring spree in order to be able to keep up with consumer demand. Over the last several months as a result of the refinancing demand greatly diminishing, Wells Fargo has been forced to give these more recent hires their 60 day notice to find new employment. While some will be moved to other departments, others will need to seek out new positions elsewhere.
Spokesperson for the bank, Jason Menke said in an interview, “The mortgage business is incredibly cyclical and we have to scale our operations according to customer demand,” Employees “were brought in for short-term assignments when they were hired. They were told that at some point these roles would end.”
Wells Fargo is not the first bank to have to make cuts in their mortgage departments due to lower demand for home loans. Their announcement follows a similar one from Bank of America who last December reassigned 2500 of their loan origination staff to their loan modification department. While home loan refinancing might be on a down turn, loan modifications are on the rise and banks are finding that these departments need more employees to help keep customers in their homes.
With interest rates having rebound slightly and credit standards being tight, the demand for refinancing home loans is down. In 2009 mortgage originations at Wells Fargo were 420 billion and that number fell considerably in 2010 to $386 billion. Just from the 3rd to the 4th quarter of 2010 the bank saw pending mortgage applications drop from $101 billion in the third quarter to $71 billion in the fourth.
While interest rates still remain low, with the average 30 year fixed rate being right around 4.89%, that number is still higher than the recent past. Last November rates were averaging 4.20% for 30 year fixed loans.
Home loans are expected to continue on the down trend again for 2011. According to an article in the Los Angeles Times:
The Mortgage Bankers Assn. projected last month that lenders would originate $ 1.03 trillion in new home loans this year, down 34% from $1.57 trillion last year.