Wells Fargo Controls One-Third of This Year's U.S. Mortages

Categories: Housing
Thumbnail image for wells fargo.jpg
Business is booming at Wells Fargo.
This spring, about a dozen housing advocates marched up Russian Hill to Wells Fargo CEO John Stumpf's house, to protest the steady stream of foreclosures in San Francisco. On another day they bused over to Los Altos and Hillsborough, to the homes of a couple of the bank's board members; their rhythmic chants ("The banks got bailed out! We got sold out!") pierced the suburban tranquility.

In each of those instances, the protesters were met by a Well Fargo security detail. And each time, the protesters handed a guard a letter to pass to the banker, asking, among other things, for a moratorium on foreclosures.

The fundamental problem of shifting a paradigm is that the people with the most power to do the shifting tend to benefit the most from the status quo.

While those protesters were marching outside those bankers' homes, those bankers' business in the housing market was booming.

Through the first half of 2012, Wells Fargo controlled one-third of all new U.S. mortgages -- a market share greater than the next seven lenders combined, industry publication Inside Mortgage Finance announced in May.

How did this happen? Wells Fargo insists it's because of Wells Fargo's quality service, Bloomberg reported today, citing a memo the bank sent to mortgage employees last week.

"Serving customers very well means that more customers and clients choose us and reward us with their business," the memo read, according to Bloomberg. "Doing this better than any other home lender gets measured as market-share growth."

Another key reason is that many other banks have drawn down their mortgage lending since the housing bubble burst. Countywide Loans, for instance, was the most prolific lender during the boom. These days Countrywide, since purchased by Bank of America, is best known as the poster boy for racist lending practices (BofA settled a lawsuit with the Department of Justice for $335 million). Not that Wells Fargo's hands are totally clean. Last month, the San Francisco-based bank settled its own DOJ lending-discrimination suit for $175 million.

But Wells Fargo, along with JP Morgan Chase, didn't take as many dumb risks during the bubble as most other banks. Now you see more Chase ATMs than Starbucks, and Wells Fargo dominates the housing loan market. Bloomberg reported that the bank has had 13 straight profitable quarters. In the first two quarters of 2012, Wells Fargo has made nearly $6 billion in mortgage-related income.

With other banks hesitant to invest substantially in the housing market, Wells Fargo fills a gap, providing low-interest credit at a time when the economy desperately needs more cash in consumers' pockets. Along the way, the banks gets cash in its own pockets, too. From the bank's perspective, there is nothing broken to fix.

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Cilla Lee
Cilla Lee

I love it since I have a bunch of WF stock!

Luntao
Luntao

Thank gawd for people like me.  I purchase my home in 2002 for 180k, the value went up to 500k in 2006 and I refinance for 400k, took the cash, quit my job, start my own company, purchase two new German cars, and travel the world for one month.  Now in 2010 my house foreclose, and the bank sold for 198K to some investors at 400 Van Ness, granted the house was still worth a little under 300K now, but who cares.  It took these investors 6 months to get me out, and they paid me 5K just to leave.  I wonder how many others got lucky like myself.  :)

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