Wells Fargo, a Mortgage 'Force of Nature'

As Wells Fargo goes, so goes the mortgage industry. Well, not exactly, but it needs to be pointed out once in a while just how much of a dominant player this megabank is in mortgage finance. In the third quarter it ranked first among all lenders, which is no secret, but in the correspondent channel it bought $41.1 billion of loans from other firms – almost triple its next closest competitor, Bank of America. B of A, of course, is in the processing of exiting correspondent. This past week two warehouse officials told me half their committed lines are collateralized by mortgages slated to be sold to – drum roll please – Wells. That's an enormous ratio which forces us to ask: what would happen to the correspondent channel if Wells departed? We're not suggesting (in the least) that Wells may exit. Chances are, its profit margins in correspondent lending are quite healthy, but as one warehouse official asked: “Where are all the other correspondent buyers? This isn't a healthy situation.”