A rebound in mortgage rates from last year's near-record low has reduced consumer demand for home loans and refinancings, leading Wells Fargo & Co. to join other industry stalwarts in laying off loan processors and related workers.
The San Francisco bank, the nation's No. 1 mortgage lender, has handed pink slips to about 1,900 workers who had processed loans generated both by Wells' mortgage unit and by independent brokers, a spokesman said Thursday.
About 230 of the positions were in California, said Jason D. Menke, a spokesman for Wells Fargo Home Mortgage in Des Moines, Iowa. Nearly 100 cuts were made in the San Diego area, 59 in Irvine and fewer numbers in San Bernardino, Rancho Cordova and Walnut Creek.
Notifications went out March 23 telling affected workers their jobs would end in 60 days, Menke said.
The majority had been hired last year as temporary workers when near-record low interest rates created a mortgage boom, especially in refinancings by homeowners wanting to lock in lower borrowing costs. Menke said those employees had been advised at the time that their jobs were not permanent.
"We're going to see if we can find other appointments for them somewhere in this very large company," Menke said. Wells Fargo employs 50,000 people in California alone, he said.
As they fire employees who had helped issue new loans, lenders are beefing up the ranks of workers who deal with a flood of delinquencies and foreclosures.
In December, Bank of America, the largest servicer of home loans, told 2,500 mortgage origination employees that they would be reassigned to loan modification duty. At Wells Fargo, the number of employees assigned to deal with borrowers in distress has risen from 6,000 in early 2009 to 16,000 today, Menke said.
Mortgage financing giant Freddie Mac reported Thursday that the average 30-year mortgage rate for well-qualified borrowers with at least a 20% down payments was 4.87% this week, compared with4.17% in November when rates hit bottom.
The current level is still remarkably low by historical standards, but has moved up enough to put the brakes on new lending this year.
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.
One component of that total, loans to buy homes, was expected to rise 28%, to $607 billion from $473 billion. But refinancings — the big contributor to last year's volume with $1.1 trillion in lending — were projected to plunge 61% to $425 billion.
When the 30-year fixed mortgage rate dipped below 4.3% for six weeks last fall, dropping briefly below 4.2% twice, it touched off a mini-boom in refinancing. Homeowners lucky enough to still have jobs and equity in their property rushed to lock in the best deals on home loans since the 1950s.
But since mid-December, 30-year fixed rates have averaged about 4.85%, with the Freddie Mac survey showing a spike back above 5% in February.
Freddie Mac, one of the government-controlled firms that guarantee most U.S. home loans, said this week's average rate of 4.87% was a notch up from 4.86% last week. The average offering rate for 15-year fixed mortgages was 4.10% compared with 4.09% a week ago.
Lenders were requiring well-qualified borrowers to pay an average of 0.7% of the loan amount in so-called points to obtain those rates. Additional third-party charges, such as appraisal and title insurance fees, also are often added to borrowers' upfront costs.
Jumbo loans too big to be handled by Freddie Mac and Fannie Mae, the other major government-backed mortgage company, have been running about six-tenths of a percentage point higher than Freddie and Fannie loans in private surveys of the market.
The limit for Freddie and Fannie loans in high-cost areas such as Los Angeles and Orange counties is scheduled to drop Oct. 1 to $625,500 from the current level of $729,750.