SAN FRANCISCO Wells Fargo is terminating eight mortgage joint ventures, including a partnership with HomeServices Lending, an affiliate of Berkshire Hathaway, and said approximately 300 jobs will be affected over the next year or so.
The bank said the decision to end the affiliated business arrangements was based on recent regulatory actions, including changes in state and federal oversight that have increased the complexity and difficulty of operating mortgage joint ventures.
The eight joint ventures fund and close loans and typically have their own sales and processing teams. Wells provides product and support and typically buys the majority of home loans from the ventures.
Franklin Codel, executive vice president and head of mortgage production, said the joint ventures became subject to state regulations after the passage of the Dodd-Frank Act. Since then, the San Francisco bank has been winding down such partnerships from a high of 100 a few years ago to 50 last year, according to National Mortgage News, an affiliate of Credit Union Journal.
The Consumer Financial Protection Bureau also recently cracked down on sham affiliated business arrangements out of concern that some firms had no operations and were being paid illegal kickbacks for mortgage loan referrals.
One of the components of the CFPB’s regulations has to do with how fees related to affiliated businesses are recorded. Some joint ventures have their own settlement services and title companies, and loans Wells purchases from those entities would not meet the CFPB’s definition of a so-called “qualified mortgage” and therefore become riskier.
“It was one of several factors that came into my thinking as we look out into the future,” Codel said in an interview with National Mortgage News. “It is a model that became more complex and risky.”
