Boston, MA 10/21/2013 (wallstreetpr) – Wells Fargo & Co (NYSE:WFC) is reported to have issued a 60-day notice to workers targeted in the fresh job cuts which could see about 925 positions axed out from its mortgage segment. The higher interest rates have hampered mortgage refinancing activities which in effect have spelt doom for many mortgage financing institutions.
By the end of Q3.13, WFC had roughly 270K employees, but now about 5,700 are being cut at its mortgage unit. This is a restructuring process which started July.
It is understandable why WFC is feeling the weight of the prevailing higher mortgage interest rates. The bank is the largest originator, in the U.S., of home mortgages. In this sense, it is mandated with the origination, certification and underwriting of mortgages for the FHA insurance. So in the absence of mortgage refinancing boom witnessed in the yesteryears, WFC is hard-hit and thus it has to cut its operation costs in this segment by letting go some of its employees.
The rising interest rates in mortgage segment are attributed to the Fed’s indication of possible slow down in previously massive bond-buying program. By September, the 30-year fixed mortgage loan was 4.49% against 3.41% at the beginning of the year in January. This is according to mortgage agency Freddie Mac.
In the Q3.13 reporting, WFC reported 43% decline in mortgage banking income, thus hitting low of $1.61 billion. The company has thus been readying itself for increased drop in new mortgages demand by trimming its workforce in this unit.
Other players in the mortgage banking segment have also had equally rough ride the same as WFC. As a result, at least 10K jobs are being cut in this segment across banks.
WFC now has a market capitalization of $225.08 billion after closing flat on Friday at $42.68; on a day that its shares traded lower than daily average. It remains to be seen how the financial services company fairs today and the entire week.