Wells Fargo has acquired approximately $51 billion in mortgage servicing rights from Seneca Mortgage Investments, a real estate investment firm in New York.

The financial terms of were not disclosed, but the transaction will be reflected in Wells' third-quarter results, the company said in a press release Wednesday. The underlying loans in the portfolio are conforming loans guaranteed by Fannie Mae or Freddie Mac.

"Mortgage servicing is an attractive, core business for Wells Fargo, and this transaction provides an opportunity for us to strategically enhance our servicing portfolio," said Franklin Codel, head of consumer lending for Wells Fargo, in the release.

The deal comes just over a year after Wells Fargo was released from an OCC order that restricted the company's ability to buy servicing rights.
The deal comes just over a year after Wells Fargo was released from an OCC order that restricted the company's ability to buy servicing rights. Bloomberg News

The acquisition comes as Wells continues to navigate a reputational crisis, amid a string of scandals in its retail bank. The San Francisco company's once-marquee brand has remained tarnished over the past year by revelations that employees created as many as 3.5 million fake accounts.

In some ways, the deal marks the beginning of a new chapter for Wells' mortgage servicing unit, which services a portfolio of about $1.5 trillion as of June 30.

Wells was one of several big banks restricted in the wake of the crisis from buying mortgage servicing rights, under an agreement with the Office of the Comptroller of the Currency. That agreement was terminated in May 2016.

The deal announced Thursday may represent a key test of the technology and procedures that Wells has implemented since then to onboard and service new mortgage customers.

Wells Fargo services its mortgages with Loansphere MSP, a servicing system of record from vendor Black Knight Financial Services that handles more than half of all outstanding mortgages in the U.S. Nationstar uses a proprietary servicing system of record. Servicing transfers between two MSP users are generally easier to complete than moving loans between different systems because the data and file formats are similar.

Seneca Mortgage Investments was formed in 2013 as a joint venture of Arbor Commercial Mortgage, along with affiliates of the asset manager GSO Capital Partners, and investment adviser EJF Capital.

Seneca Mortgage Investments in 2016 hired Nationstar Mortgage Holdings as a subservicer for its $50 billion mortgage servicing portfolio.

Nationstar last month rebranded its servicing and lending unit, which is now known as Mr. Cooper.

Kristin Broughton

Kristin Broughton

Kristin Broughton is a reporter for American Banker, where she writes about the business of national and regional banking.