By Mark Huffman
ConsumerAffairs.com
July 9, 2010
Wells Fargo is getting out of the subprime mortgage business, announcing plants to consolidate its Consumer Finance division.
The company said it expects 638 independent consumer finance offices will be closed as a result. In closing the offices, Wells Fargo said it is "exiting the origination of non-prime portfolio mortgage loans."
Subprime loans, often offered with low "teaser" rates, were the first to go bad, triggering a wave of foreclosures and precipitating the credit crises in late 2008.
The remaining consumer and commercial loan products offered through Wells Fargo Financial will be realigned with those offered by other Wells Fargo business units and will be available through Wells Fargo's expanded network of community banking and home mortgage stores, the company said.
The consolidation is also the result of Wells Fargo's 2008 merger with Wachovia. The bank says its customers now have access to its 6,600 Wells Fargo and Wachovia community bank stores and its 2,200 Wells Fargo Home Mortgage locations, eliminating the need for a separate network of Wells Fargo Financial local offices.
Fewer than two percent of all Wells Fargo's real estate loans were originated in Wells Fargo Financial stores in the first quarter of 2010, the company said.
"Our network of U.S.-based consumer finance stores, which have historically operated as an independent sales channel from our bank operations, have served customers well for more than 100 years," said David Kvamme, president of Wells Fargo Financial, "but the economics of a separate Wells Fargo Financial channel are no longer viable, especially now that our customers have access to the largest banking and mortgage store network in the United States."
The company said the restructuring of Wells Fargo Financial will not affect the number of community banking or home mortgage stores currently in operation. Customers with existing Wells Fargo Financial consumer loans and clients of Wells Fargo Financial's commercial businesses will continue to be served without disruption.
Consolidation
FHA home loans, auto loans and credit cards previously offered by Wells Fargo Financial will be consolidated with similar products across the company and will be offered through the company's network of community banking stores, mortgage stores, phone banks and wellsfargo.com. Wells Fargo Financial's commercial businesses will be realigned with business units within Wells Fargo over the next 12 months. However, Wells Fargo will no longer originate non-prime portfolio real estate loans.
Wells Fargo said it will also eliminate approximately 2,800 positions during the next 60 days, and 1,000 positions will likely be eliminated during the next 12 months.
