Wells Fargo & Co. is eliminating more than 500 jobs, including 121 in Tempe, in a division that makes home loans to high-risk borrowers, adding to the economic distress caused by the decaying subprime mortgage market.
Most of the cutbacks, concentrated in Arizona, California and South Carolina, stem from Wells Fargo’s recent decision to make it more difficult for borrowers with blemished credit records to qualify for subprime mortgages.
The tougher lending standards means Wells Fargo will be handling fewer subprime mortgages, reducing the need for as much staffing, according to a statement issued by the San Francisco-based bank.
Most of the 514 affected workers received layoff notices last month and will leave Wells Fargo next month unless the bank can find them new jobs. Forty-five employees at Wells Fargo’s facility at 1150 W. Washington in Tempe, received notices on Feb. 21, with 76 more workers receiving notices on Feb. 23.
About 70 jobs in Tempe were cut earlier this year.
Wells Fargo spokeswoman Debora Blume declined to specify how many employees work in the bank’s subprime mortgage unit, or what type of jobs would be cut.
The bank employs about 158,000 workers through all its operations.
Several other subprime mortgage lenders, including the corporate parent of Ameriquest Mortgage Co., have been trimming their staffs in response to the recent market turmoil.
Wells Fargo ranks among the nation’s largest subprime mortgage lenders, but so far has been able to avoid major losses.
Other lenders have either collapsed or are struggling to survive as more subprime borrowers default on exotic mortgages that are graduating to higher interest rates after initially offering extraordinarily low financing to make the payments more affordable.
More than two dozen subprime lenders have either closed or gone bankrupt since late last year.
The deepening problems in the subprime sector threaten to ripple through the economy as more workers lose their jobs and more foreclosed homes hit the already slumping real estate market, creating a glut that causes home prices to decline.
Tighter lending standards also threaten to decrease the number of people who can afford to buy a home, another factor that could weigh on housing values.
The subprime worries already have rattled the stock market in recent weeks, leaving investors feeling less wealthy than they did a few weeks ago.