SAN JOSE, Calif. (AP) — The mortgage division of Wells Fargo & Co. said Thursday it plans to pull out of the increasingly risky business of issuing home loans through brokers to borrowers with blemished credit records.
The move by San Francisco-based Wells Fargo, the nation's fifth largest bank, is the latest fallout from the decaying subprime mortgage industry, which lends to people with spotty credit histories.
As interest rates have risen and home values have moved sideways or even fallen in parts of the country, many of these borrowers have been defaulting.
Wells Fargo ranks among the sector's largest lenders but has been relatively unscathed so far by the implosion that has led to the closures or bankruptcies of more than two dozen subprime lenders since late last year.
Wells Fargo said the subprime wholesale lending business represented 1.6 percent of the bank's $397.6 billion in mortgage lending last year.
But the "continued turmoil" in the sector is not worth the risk, said Cara Heiden, Wells Fargo Home Mortgage division president.
Wells Fargo said it will shutter its subprime wholesale offices in Baton Rouge, La., and Des Moines, Iowa. Wells Fargo said it will lay off 170 workers at the Louisiana office and try to help them find jobs at other companies. The bank said it will try to find jobs within the company for the 67 workers at the Iowa office.