Wells Fargo & Co., which makes one out of every five U.S. home mortgages, is laying off 356 people from its home mortgage division across the country as rising interest rates cut into refinance activity.
The cuts include 34 people in Minneapolis and 58 in Des Moines, where the bank's home mortgage division is based. All employees were notified last week, the company confirmed Monday.
About 8,500 of Wells Fargo's nearly 20,000 employees in Minnesota work in its home mortgage division.
The trims come as mortgage lenders wrestle with rising interest rates and a shifting landscape for home loans. Long-term rates, including those on home loans, have risen in reaction to Fed Chairman Ben Bernanke's hints that the Federal Reserve will pull back on the massive $85 billion a month bond buying program it has been running to hold rates down and stimulate the economy.
The average rate on a 30-year fixed rate mortgage Monday was about 4.35 percent, according to BankRate.com. Two months ago it was about 3.7 percent.
The surge nicked the San Francisco-based lender's second-quarter profits of $5.52 billion, with its mortgage banking income sliding 3 percent from last year. While Wells Fargo executives were bullish about the country's improving housing market during an earnings call with industry analysts, they warned about coming declines in mortgage refinance volumes.
Guy Cecala, CEO and publisher of Inside Mortgage Finance, said his best guess is that refi volumes will probably drop about 30 percent with home purchase volumes rising about 20 percent, translating into an 18 percent decline in total mortgage originations in the second half of the year.
"A lot depends on what happens to mortgage rates, but the recent (last week) drop in rates suggests that the big jump in rates we saw in June may not hold up or necessarily signal further increases in the short term," Cecala said in an e-mail.
