Understanding the Impact of Wells Fargo Layoffs on West Des Moines

Wells Fargo announced they are cutting hundreds of employees throughout Des Moines metro region. According to reports, employees in their home mortgage division were informed they will lose their jobs.

Reports indicate that one bank is cutting mortgage staff due to declining loan demand brought about by rising interest rates, following in the footsteps of many of their competitors who have also reduced staff in this department.

The Impact of Layoffs on West Des Moines

Wells Fargo recently announced plans to reduce its workforce by up to 10 percent within three years in an effort to achieve cost savings and meet customer preferences shifting toward digital self-service options. Wells Fargo employs 265,000 team members, so this move may affect up to 26,500 jobs.

Wells Fargo has been plagued with scandal and regulatory issues over recent years, such as reports that employees created millions of fake accounts without authorization, charged thousands with auto insurance they did not require and charged mortgage customers fees that did not belong to them. Wells Fargo now faces multiple lawsuits due to these practices and one federal judge has assessed a $1 billion penalty against them for misconduct.

Wells Fargo remains one of Des Moines's biggest employers despite their challenges, employing 14,500 team members in Des Moines alone, including its home mortgage division which operates here. Furthermore, Wells Fargo holds a significant presence in correspondent lending business which finances loans arranged through third parties such as mortgage brokers. At present they may reduce staff levels in this segment in light of rising interest rates and competition from nonbank lenders.

Last week, Wells Fargo informed Iowa Workforce Development of their plan to lay off 36 employees from its mortgage division in Des Moines due to slow mortgage loan originations - as seen after Federal Reserve began raising interest rates and more aggressive non-bank lenders such as Rocket Mortgage offer more aggressive mortgage loans.

These latest layoffs mark a second round of local layoffs within two months; last April, the company cut 78 employees across various cities across Des Moines and Iowa for similar reasons as now as well as general reevaluation of mortgage-lending operations due to evolving market conditions.

Wells Fargo this month reached an agreement to resolve an investor lawsuit accusing them of misrepresenting its mortgage-servicing business and misrepresenting itself in that capacity. Wells Fargo will pay investors $235 million as compensation; moreover, about $15 million will also go toward settling any potential legal claims brought forward against it by the Justice Department.

How the Layoffs Affect the Local Economy

Wells Fargo is currently the largest private employer in Des Moines with around 14,000 workers, though they are in the process of cutting tens of thousands of positions nationwide as they deal with scandal-related fallout.

Wells Fargo's home lending business has been hit hard by higher interest rates, the slowing housing market and increased competition from nonbank mortgage lenders. Wells Fargo has reduced mortgage originations and servicing volumes recently - one factor behind why workers had to be let go - which may explain their recent layoffs.

Layoff victims still receive pay, and will receive severance packages to help them find employment elsewhere. Furthermore, the company may provide them with other opportunities, such as transferring to another division or accepting another job offer elsewhere - in some instances even at their old salary levels!

Employees who have been laid off may also qualify for unemployment benefits. The amount received depends on both how long the employee worked at their company and earnings - typically lasting up to 26 weeks in most cases.

If an employee is fired for cause, they have the right to a hearing before a judge. Certain states such as New York require employers to give 60 days' notice prior to mass layoffs under the Worker Adjustment and Retraining Notification Act; businesses are required to notify all relevant bodies including: Department of Labor; local workforce development boards; union representatives and the city or town where the workplace resides.

Tim Sloan told employees in a town hall meeting of Wells Fargo that it must downsize to implement cost-cutting efforts and respond to customers moving toward digital self-service options. He promised transparency as they carry out their plan for the future and strived to restore Wells Fargo's culture following years of scandal involving fake accounts, falsifying sales data falsification and firing over 8,000 employees for falsification of sales data.

How the Layoffs Affect the Local Community

Wells Fargo recently informed 140 employees in Springfield of layoffs at its home lending division - purchasing mortgages originated by other financial institutions - starting this month. As it conducts this downsizing exercise, Wells Fargo promised transparency with its employees during this process.

Wells Fargo is altering its business in order to address recent scandals and changing market conditions. They are scaling back home lending operations, with several employees in Des Moines being let go already due to rising interest rates as one reason.

Leaders from the company pledged their assistance in helping those affected find new jobs either within or with other companies, with hopes that 5-10% reduction of staff is realized as part of its cost reduction plans.

Wells Fargo informed its employees on Thursday of upcoming layoffs and cuts scheduled to begin early next year. With more than 350 job vacancies available in Iowa alone, affected workers may be encouraged to apply for those opportunities instead.

Wells Fargo will provide affected employees with severance pay and other benefits, including job placement assistance. In addition, Wells Fargo has also begun offering low-cost loans for home repairs while increasing financial literacy programs - both measures taken to comply with tighter Federal Reserve rules on residential mortgage lending.

This announcement comes amid signs that the economy and housing market are both slowing, as well as an ongoing increase in regulatory scrutiny, leading to decreased profits within banking industry.

Wells Fargo is also revamping its mortgage operations while simultaneously shrinking its correspondent lending business. Correspondent lending involves depository banks funding mortgages arranged by outside lenders; previously Wells Fargo was the leading correspondent lender; it has since been overtaken by JPMorgan Chase.

Wells Fargo's layoffs may be devastating to Des Moines' economy, yet large corporations often downsize during tough economic times. Many of those affected live locally and are likely to find work elsewhere within Des Moines' economy.

How the Layoffs Affect the Local Schools

Wells Fargo has recently been beset by multiple scandals and regulatory issues, forcing the bank to retrain employees and pay various fines in various areas, such as allegations that it overcharged customers for auto insurance premiums or opened millions of fake accounts.

Wells Fargo Bank has also come under scrutiny over its mortgage division, after it laid off hundreds of employees due to declining sales and slow housing market activity last year. Many affected were sales-focused employees such as mortgage bankers and home loan consultants - a further blow from its scandals which it has struggled to overcome.

Wells Fargo is currently one of the nation's top mortgage lenders, yet has recently fallen behind its competitors in terms of market share. A combination of slowing home sales, rising interest rates and tightening monetary policy by the Federal Reserve have severely compromised Wells Fargo's mortgage business and forced it to lay off employees from this division to reduce costs and improve profitability. As a result, Wells Fargo is taking measures to streamline costs and increase profitability through workforce reduction efforts.

Though it remains to be seen if the bank will be successful in turning around its mortgage business, CEO Charlie Scharf has made changes at the bank that may help. These include restructuring its leadership ranks and strengthening compliance measures as well as expanding businesses that put them directly in competition with JPMorgan Chase and Goldman Sachs such as credit cards and investment banking.

Bloomberg reports that Bank of America is currently laying off employees across the country, according to sources who told them the bank is cutting hundreds of mortgage employees and shifting focus towards more lucrative businesses such as wealth management and corporate finance.

Layoffs have also had an effect on employees in Iowa. Wells Fargo submitted a WARN notice to Iowa Workforce Development informing it of its plans to reduce staff in their Des Moines, Clive and Ankeny offices; 366 Iowa workers will be affected.