Wells Fargo will end its mortgage-related ventures with its eight partners. The bank has decided rather than fight the new regulations and changes in state and federal oversight stemming from The Dodd-Frank Act, it will end its joint ventures with its partners.
Those eight partners are; Colorado Mortgage Alliance, Bankers Funding, DE Capital Mortgage, HomeServices of America, Military Family Home Loans, Prosperity Mortgage, Premia Mortgage and Private Mortgage Advisors and a joint venture with the real estate firm Long & Foster. The move will cut approximately 300 jobs.
The Minneapolis-based HomeServices Lending of America will lose almost 150 of those 300 jobs. Wells estimates it will take from 12 to 18 months to end the relationships, those job losses will not be immediate.
Mortgages are big business for the bank that is the nation’s largest mortgage lender. Its residential home-loan business remains a major contributor to its record profits. Wells makes about one out of every four home loans in the U.S.
Recently Wells has been making changes limiting its future legal and regulatory problems. One year ago, they ceased the business of reverse mortgages because of declining home values.
When the Federal Reserve cut interest rates, it prompted millions of homeowners to refinance their homes to reduce costs. The interest rates are going up again, and the amount of homeowners wanting to refinance is starting to dry up, something the bank is acutely aware.
The Consumer Financial Protection Bureau (CFPB) recently cracked down on scams affiliated with concerns some firms were being paid illegal kickbacks for mortgage loan referrals. Some of the joint ventures had their own settlement services and title companies. The loans Wells purchased from those entities would not meet the CFPB’s definition of a so-called “qualified mortgage” and would become riskier.
More than a year ago, Wells stopped its wholesale mortgage lending during the same time the bank announced its settlement with the U.S. Department of Justice regarding alleged discrimination tied to a sampling of its mortgage loans written between 2004 and 2009. Bank of America, Citigroup, JPMorgan Chase and GMAC were the four other banks that signed off on that National Mortgage Settlement as well. Both Bank of America and Citigroup had exited the wholesale mortgage lending too.
Wells’ is known for its ability to foresee trouble down the road. Exiting the mortgage venture is a reaction to possible future threats. The bank’s farsightedness has long been thought of as the reason the bank rose to the rank of the world’s largest bank, surpassing the six-year running of Industrial & Commercial Bank of China.
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