It has been a rough start to 2016 for Wells Fargo. The nation’s largest mortgage lender agreed to a settlement last week for more than $1 billion in early February and subsequently announced that it would be slashing 581 mortgage jobs nationwide.
It was the second time since October 2015 that continuing market changes in the mortgage industry forced Wells Fargo to cut hundreds of mortgage-related jobs. In October, the bank announced that it was cutting 490 jobs from its mortgage servicing division.
The 581 employees whose positions were cut were provided with a 60-day notice, according to Wells Fargo spokesman Alfredo Padilla.
“We are committed to retaining as many team members as we can and where possible we are working to identify other opportunities within Wells Fargo for affected team members,” Padilla said. “We announced staffing changes as the result of continuing market changes, including improvements in delinquency and foreclosure rates and only modest improvements in the demand for mortgage financing.”
The layoffs to the mortgage industry are a sign of the times. The continued nationwide decline in foreclosure inventory and delinquencies has reduced the need for the intervention of mortgage servicers with loss mitigation options for delinquent borrowers, which has subsequently caused more than one of the nation’s largest mortgage lenders to make job cuts from its mortgage servicing department. Last year, Bank of America cut about 350 jobs [1] from its Legacy Asset Servicing Division, which works with customers who are delinquent on their mortgage payments.
The layoffs are not the only problem that Wells Fargo has had so far in 2016, however. In early February, the bank agreed to a settlement for $1.2 billion [2] with several regulators, including the U.S. Department of Justice, to resolve civil claims of “reckless” underwriting on mortgage loans insured by the Federal Housing Administration. The bank’s 8-K filing showed that the settlement will knock $134 million, or $0.03 per share, off the company's 2015 profits, dropping earnings down to $22.9 billion, or $4.12 a share.