Mortgage Giant, Wells Fargo & Co. announced the lender would no longer make subprime mortgage loans and they were closing their consumer finance division that originated bad credit home mortgages. The closing of this Wells Fargo division will result in 3,800 layoffs and the eliminated future subprime mortgage lending. The mortgage giant said the consumer finance division originated less than 2% of its home loan volume in the first quarter of 2010.
According to Wells Fargo chief executive Dave Kvamme “Credit losses in the Wells portfolio that rose in the current economic environment could not continue.” The bank indicated in their quarterly filing, that overall loss rates were at 4.62%. However Wells’ portfolio’s performance was very similar to prime loan portfolios across the board for the mortgage industry. Wells Fargo has been one of the largest home mortgage lenders in the United States for decades and some times the company is forced to make tough decisions that impact the entire industry. A spokesman for Wells Fargo & Co. said they would record charges of about $185 million in total related to the closings. The unit reportedly originated less than 2% of Wells Fargo & Co.’s $76 billion in residential production during the first quarter. A company spokesman for Wells said the company was poised to originate more FHA home loans going forward.
