Wells Fargo & Co. is withdrawing from the eight joint ventures it has in the mortgage lending business. The company said in a press release that it made the decision based on the current regulatory and market environment.
These ventures were responsible for just 3% of the company’s mortgage production. The press release also said the decision did not “affect our commitment to our retail and correspondent mortgage businesses.”
The eight ventures involved are Bankers Funding Co. LLC, Colorado Mortgage Alliance LLC, DE Capital Mortgage LLC, HomeServices Lending LLC, Military Family Home Loans LLC, Prosperity Mortgage Co., Premia Mortgage LLC and Private Mortgage Advisors LLC.
Prosperity Mortgage is a joint venture with real estate company Long & Foster. Tim Wilson, president of Long & Foster’s Core Services, said in the case of Prosperity, the decision to end the venture was a mutual one and that it was something the parties were working on for a while.
In the venture arrangement, Prosperity was selling to Wells and other aggregators. On its own, Prosperity plans to become a direct seller to Fannie Mae and Freddie Mac, Wilson said, although no decision has been on whether it will retain servicing rights. It will also still sell some loans to aggregators.
This joint venture will end as of Jan. 1, 2014 and going forward the mortgage company will be wholly owned by Long & Foster.
Randy Krout, president of Prosperity Mortgage, will become president of the new company and will report to Wilson at Long & Foster. All other Prosperity team members will be offered employment with the new company. Long & Foster also has started hiring additional employees both to grow and expand the business.
In a press release, HomeServices Lending, another real estate sales company, said it will become a wholly owned subsidiary of HomeServices of America, a Berkshire Hathaway affiliate. The transition work has been underway for some time, and is expected to conclude in 2014, the company said.
“HomeServices is a world-class company with an expansive and aggressive growth strategy,” said Todd Johnson, president of HomeServices Lending. “Wells Fargo has been a great partner for many years, and we look forward to working together in the future, but we felt that a wholly-owned model better fits our long-term strategy.”
In an interview, Johnson added that the declining number of joint ventures at Wells (they had five times as many one year ago) and that company’s ongoing commitment to them was something HomeServices had been looking at and why it elected to start working on this transition even before Wells made its decision.
Plans are to eventually become a direct seller to Fannie Mae and Freddie Mac, and possibly subservice, he said.