(Reuters) - Wells Fargo & Co (WFC.N) is boosting its teams that process mortgage loans to prepare for higher mortgage volumes, changing course after it laid off about 1,000 employees here in the division in 2018, according to a memo viewed by Reuters.
Many of the hires will be in Des Moines, Iowa and Minneapolis, according to the memo. Yet, Wells Fargo, the largest U.S. mortgage originator according to Inside Mortgage Finance, laid off hundreds of mortgage employees in these cities just last year.
Representatives from Wells Fargo did not immediately respond to requests for comment. It was not immediately clear how many employees the bank will add.
The about-face comes as banks brace for a surge in mortgage activity fueled by lower interest rates. Refinancing activity, which accounts for a majority of mortgage applications, has more than doubled from a year ago, according to data released by the Mortgage Bankers Association on Wednesday. Purchase activity has climbed 10% from a year ago.
Indeed, business could boom further if mortgage rates drop even more, with U.S. monetary policymakers expected to cut the benchmark interest rate a third time this year at the end of October.
Other large banks that also let go of staff here in 2018 will likely follow Wells Fargo in staffing back up, according to banking sources. They said some lenders have been struggling to keeping up with the wave of originations following sweeping headcount reductions across the industry.
Large banks have laid off thousands of mortgage employees over the past two years as refinancing applications plunged and amid increased competition from non-bank entrants like Quicken Loans Inc.
The financial services industry tends to fire and rehire thousands of employees as revenue fluctuates, but analysts thought the most recent decline in the mortgage business would be permanent as the process has become more automated.
The Wells Fargo staffing plans will be fluid, allowing the bank to adjust to the market, the memo said.
The latest hiring initiative could throw a wrench into Wells Fargo’s plans to cut costs. In July, the bank warned investors that 2020 costs would not be lower as previously expected since the bank hired thousands of employees to improve its risk management and work through the regulatory fallout from its various scandals.
The fourth-largest U.S. bank by assets has leaned on cost cuts to stabilize its bottomline amid sluggish revenue trends. Now, the San Francisco-based bank must also contend with fresh macroeconomic uncertainty from a changing interest rate environment that’s pressuring lending margins across the industry.
Reporting by Imani Moise; Editing by Bernadette Baum