As refinance production has recently slowed at Wells Fargo & Co., thousands of jobs have been eliminated. With quarterly originations projected to fall another 40 percent, more layoffs could be ahead.
The San Francisco-based company previously reported that residential loan originations were $112 billion during the second quarter.
While Wells Fargo’s mortgage production was up 3 percent from the previous quarter, volume tumbled 15 percent from the year-earlier period.
Business is set to take an even deeper dive.
In a presentation Monday at the Barclays Capital 2013 Global Financial Services Conference, Wells Fargo Chief Financial Officer Tim Sloan projected that just $80 billion in home loans will be originated during the third quarter.
Slowing production has already prompted the lender to disclose planned layoffs.
“So far in the quarter, we’ve announced reductions of approximately 3,000 FTEs,” Sloan said, “and we will continue to actively manage our capacity based on volume as we’ve done in the past.”
The presentation indicated that mortgage fulfillment staffing fell from around 13,000 at the end of 2010 to less than 12,000 by the end of 2011.
More recently, the number of fulfillment staffers has fallen from a peak of more than 18,000 full-time employees as of Dec. 31, 2012, to roughly 17,000 as of the end of June.
Sloan explained that the size of the mortgage business has always been adjusted based on production demand. He said that as volume falls, expenses like commissions also fall.
Reductions in headcount, which lag declines in cost of goods sold, could accelerate if volume continues to slow.
“We have an experienced management team in our mortgage business that’s managed through many different refi cycles,” Sloan said in his prepared remarks. “We will continue to make adjustments in the current environment.”
Sloan additionally noted that while mortgage production is hurt by higher interest rates, mortgage servicing benefits due to slower amortization on mortgage servicing rights.
