Back to Home > Wednesday, Mar 21, 2007 News Posted on Wed, Mar. 21, 2007 email this print this re... Wells Fargo cuts 71 jobs i

Job cuts loom in the East Bay and elsewhere in the Bay Area, as Wells Fargo & Co. and NovaStar Mortgage Inc. cope with mortgage ailments that have afflicted the struggling housing market.

San Francisco-based Wells Fargo plans to cut 71 jobs in Concord, part of a total reduction of 444 positions being eliminated in a bank operation that specializes in high-risk home mortgages, sometimes dubbed subprime loans.

Wells Fargo will jettison the positions because it has decided to tighten its lending standards for offering mortgages to people who have a less-than-stellar credit status. The bank told the 444 employees in late February about the pending staff reductions.

In all, 514 employees involved in home financing activities recently have lost their jobs or soon will be discharged. Previously, Wells Fargo had terminated about 70 jobs in the bank's alternative lending unit, which handles loans to borrowers who might not qualify for the company's prime loans.

Besides the 71 in a Wells Fargo office on Willow Pass Road in Concord, the bank decided to cut 252 jobs in South Carolina and 121 in Arizona, said Chris Hammond, a company spokesman.

The 70 job losses in the Wells Fargo alternative lending group in Arizona also were related to the slump in housing. The problems that confronted this unit included weaker housing demand, rising interest rates and intense competition in that mortgage sector.

NovaStar will eliminate about 350 jobs nationwide, about 17 percent of the work force of the Kansas City-based firm, which specializes in subprime and other loans. The reductions include 75 in California, said Dick Johnson, a company spokesman.

Among those losing work are about nine people who live in the Bay Area but work for NovaStar offices elsewhere, according to San Ramon resident Steve Erdman, an account executive laid off by NovaStar.

"This whole subprime thing is going away," Erdman said. "It's not what it once was and it never will be what it was. Everything is going to change. "

The worst of the fallout from the subprime difficulties is expected to blanket those lenders that failed to diversify their loan packages, industry insiders said.

"The primary impact falls on companies that specialized in subprime and teaser loans," said Christopher Cagan, director of research with First America CoreLogic, which provides technology for the mortgage industry.

"While mainstream lenders such as Bank of America and Wells Fargo will experience some impact, it will be relatively modest and they will be able to withstand the difficulties," Cagan said.

That view was echoed by Wells Fargo officials, who said the bank has kept the subprime business a relatively modest part of the overall operations at the bank, which generated $47.8 billion in revenue during 2006.

What's more, at the same time that the Wells Fargo subprime business has retrenched, the bank has enjoyed a surge in its home loans to borrowers with good credit and income profiles.

The employees who are losing jobs in the East Bay could have a decent chance at landing a position within the bank. Hammond said Wells Fargo has about 150 openings in the Bay Area.

"The economy remains very strong," Blackwell said. "Interest rates are at historic lows. Refinancing activity is starting to pick up. We are seeing strong activity for purchase mortgages. All the fundamentals look good for us now."

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