The banking-sector news grabbing headlines today is the announcement by Wells Fargo (NYSE: WFC ) that it will lay off around 2,300 of its employees, a consequence of the inevitable cooling of the mortgage refinancing market. According to fresh data from the Mortgage Bankers Association released yesterday, last week the volume of applications to refinance dropped by 8% on merely a week-over-week basis.
That's pulling down the overall average for mortgage applications, which is off by more than 50% from its peak this past May. Meanwhile, those sorts of loans are getting pricier. According to the latest Freddie Mac Primary Mortgage Market Survey data released today, fixed-rate mortgages are up noticeably over last week's figures. The average for the 30-year fixed is now at 4.58%, and its 15-year little brother stands at 3.60%. The previous survey had them at 4.40% and 3.44%, respectively.
Wells in particular is vulnerable to such developments, as it's far and away the nation's top housing lender and much of its business comes from mortgages. The company's big and has legions of loan officers, but a pink-slip figure well in the thousands is still cause for concern. No wonder the bank's stock is trailing the Dow today.
Ditto for Bank of America (NYSE: BAC ) , which is also certain to feel the impact of a drier mortgage market. B of A's headaches in the home lending sphere have been well documented and to a great degree self-inflicted, as many of the company's investors had and still have issues with the very questionable Countrywide Financial acquisition during the crisis years.
Another big player in the home lending sphere, JPMorgan Chase (NYSE: JPM ) , seems to be holding up a little better in terms of investor sentiment. But that may be more because it's been a whole three days since the company's gotten hit with a new legal threat. In the latest case, the Justice Department said it's sniffing around to determine whether subsidiary J.P. Morgan manipulated the nation's energy markets.
Last month, the unit agreed to fork over $410 million to settle allegations that it engaged in similar chicanery in California and the Midwest. For a banking behemoth, that isn't too big a hit to the finances, which is possibly why investors are effectively shrugging off the news. Or maybe they've just grown accustomed to the constant spray of lawsuits and investigations raining down on the company.
Elsewhere on the legal front, Morgan Stanley (NYSE: MS ) is fining itself! OK, not exactly; FINRA, the financial industry's self-regulator, has smacked the company with a $1 million penalty. FINRA has taken umbrage with the bank's retail brokerage unit, which it believes did not "provide best execution" for its clients in certain bond transactions. In addition to the $1 million, Morgan Stanley will also have to fork over $188,000 in restitution to some of those clients. The company's stock lagged behind the Dow today, although not by a wide margin.