According to the WilmingtonStar-News report, Wells Fargo & Company (WFC) will close down its mortgage application center in Wilmington, N.C., leading to 259 job cuts. The Wilmington center provides back-office support to the company’s mortgage division in the Carolinas region as well as in other parts of the country.
The closing of mortgage application unit is a part of its broader plan to cut mortgage processing operations that will reduce more than 1,900 jobs nationwide.
In the recent months, the fast-paced demand for consumer refinancing gradually slowed down due to slight increase in interest rates and reduced sales of the existing homes. After the evaluation of current market and loan application volume, Wells Fargo expects a significantly reduced mortgage market in 2011. The company also laid off 142 interim workers, who were working on refinancing mortgages, in the month of February.
Wells Fargo also filed a notice with the N.C. Commerce Department to abide by the federal Worker Adjustment and Retraining Notification Act (WARN). The company announced it will help to retain the retrenched employees within the company and will assist the team members, who are most affected, in searching jobs. Further, Wells Fargo is also provide separation benefits to the retrenched employees at the Wilmington center based on their years of service and compensation packages.
The closing down of the center followed Wells Fargo’s announcement of laying off approximately 200 employees, including 82employees in San Antonio, 30 in Addison and 67 in Bedford, Texas in its home mortgage division.
Two years ago, Wells Fargo Home Mortgage division employed approximately 200 people on short-term assignments to support the augmented home loan and refinance applications at its Wiseman campus. When interest rates were favorable, the company hired these workers as a surge in mortgage applications was visible in 2010, particularly for mortgage refinancing. The company announced that approximately 180 interim mortgage workers, who were processing loan applications under the Home Affordable Refinance Program (HARP), are under the current lay off action.
During the fourth quarter of 2010, Wells Fargo’s mortgage applications in the pipeline, which were closed to approval, plummeted 27% sequentially. Refinancing represented about 70% of Wells Fargo’s mortgage business in the quarter. Therefore, if the trend continues, overall revenue of Wells Fargo will be adversely affected.
Wells Fargo employs about 13,000 people in metro Des Moines. Its Home Mortgage division, which is based in West Des Moines, captures approximately 25% of the U.S. home lending market.
Earlier this week, Wells Fargo announced the elimination of 68 positions at a Vancouver call center, which supports collection of loans for Wells Fargo Financial division, the company’s consumer finance subsidiary. The action followed as the customers are paying down debt, eliminating the need for debt collectors.
However, earlier this month, Wells Fargo has announced the news of some job creation in the Mid-Atlantic region. The company will employ over 1,000 team members by mid-May 2011 in Wachovia Banking Stores in Virginia, Maryland and Washington, D.C.
Last week, the closest competitor of Wells Fargo – Bank of America Corp. (BAC), also announced jobs cut of approximately 100 employees in its consumer and small business banking unit. The layoffs forms a part of BofA’s ongoing efforts to overhaul its consumer banking unit.
We believe that with its diverse geographic and business mix, Wells Fargo is well positioned compared to its peers. The Wachovia acquisition and the demise of some of the smaller players facilitated the company to garner a larger share in the mortgage markets. Yet, the recent financial regulations are anticipated to have a negative effect on the company’s top- and bottom-line results. Besides, costs associated with loan resolutions and loss mitigations are also expected to remain elevated in the near term. Moreover, we believe that the present job cuts will enable the company to reduce expenses, alleviating bottom-line pressure.
Wells Fargo currently retains its Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we are maintaining a long-term “Neutral” recommendation on the stock.
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