With expectations of “further turmoil” in the subprime mortgage lending market, Wells Fargo Home Mortgage announced this morning it will close its “nonprime” wholesale lending business, which processes and funds loans for third-party lenders.



The West Des Moines-based company said in a press release the closure will affect 67 employees in Greater Des Moines; officials said the company is working to identify positions for those employees elsewhere in the Wells Fargo & Co. organization. Wells Fargo will also eliminate 170 positions in Baton Rouge, La.

Foreclosure and default rates on residential mortgages in Iowa and across the country have increased sharply as more borrowers have been unable to make the payments on these riskier subprime loans, which often incorporate an adjustable rate component that increases after two or three years.

“For the foreseeable future, we believe continued turmoil in the nonprime sector will result in financial returns for our nonprime wholesale channel are not commensurate with the risks inherent in the business,” said Cara Heiden, president of Wells Fargo Home Mortgage.

The decision will have no effect on Wells Fargo’s prime lending business, the company said. Last year the home mortgage division generated residential loans of $397.6 billion; nonprime loans represented 1.6 percent of those loans.

“We will continue to offer prime loans through all our distribution channels, including wholesale, Heiden said. The company will also continue to offer nonprime loans through channels where the company has direct relationships with consumers, including Wells Fargo Home Mortgage’s retail unit and Wells Fargo Financial.