UBS AG, which has been expanding in mortgages lately, plans to shutter a four-year joint venture with Wells Fargo & Co. that makes home loans to the Zurich company's U.S. wealth management clients.
Mari Hope, a spokeswoman for UBS, said that it will replace the venture in the next few months with a proprietary residential mortgage platform that "would bring together" the company's wealth management unit "with the products and capabilities of its investment bank."
The investment bank, like many others, has gotten deeper into the mortgage business this year. After several years of buying loans for its conduit from originators, it began buying them in January through U.S. brokers under the name UBS Home Finance.
Peter Slagowitz, who helps run UBS' mortgage securitization business, told American Banker in October that it aims to become a top 10 originator of alternative-A and jumbo mortgages soon.
He also said that it planned eventually to originate loans through UBS' financial advisers, and that option adjustable-rate mortgages, which his outfit introduced in September, are "a good Wall Street product," meaning they are suitable for borrowers who get paid commissions or bonuses and use the flexible payments as a cash-management tool.
UBS hired Terry Rowland from American International Group Inc.'s American General Consumer Finance in July to run the wealth management mortgage platform. Mr. Rowland is the former president and chief executive of Prosperity Mortgage Corp., a venture between Wells and Long & Foster Realty of Washington.
He also had managed E-Trade Financial Corp.'s correspondent channel and had been a regional sales president at Royal Bank of Canada's RBC Mortgage Co., now part of New Century Financial Corp.
Wells has been securitizing the loans originated by the joint venture with the Swiss company, UBS Mortgage LLC, and will keep the servicing rights on those loans after the partnership ends. UBS would not say how much volume the venture has generated.
UBS said that it has tentative plans to close the venture in six months, but that the exact date could change. Observers wondered if UBS was launching its independent platform to capture flow for a securitization business that it says is growing rapidly.
"If they are starting to provide a lot of loans themselves, maybe they feel they don't need a joint venture anymore," said Bose George, a mortgage analyst at Keefe, Bruyette & Woods Inc. "It seems logical they would underwrite themselves," instead of letting Wells channel flow into its own pipeline.
Ms. Hope said that UBS would not provide details about its expanded product and service line until after a six-month "transition period." She would not say if the company planned to use the UBS Home Finance brand on loans made through the wealth management division.
UBS was also hesitant to explain why it is pulling the plug on its partnership with Wells, but it called the fifty-fifty venture a success.
Mr. Rowland in a press release Tuesday said that the partnership has "been a rich and rewarding experience," and he called Wells "an exemplary partner."
At press time Wells had no comment on UBS' plan to end their venture.
Also Tuesday, Wells formally introduced a program designed to help nonprime mortgage customers manage their credit standing and meet their financial goals.
The San Francisco banking company had said in June that it was developing the Steps to Success program of educational and banking products.
When their loans are funded, eligible customers are enrolled automatically in the free program and invited to call a toll-free number to talk to dedicated specialists who can tell them about the program. In addition to offering the toll-free number, Wells will contact borrowers about the program.
Participants get two free credit reports, one immediately and one in 12 months, both with credit scores; access to educators who can explain the reports; a bilingual financial literacy course available on CD-ROM or in printed form; and information about automatic banking services and payment products.
By law, all U.S. consumers are entitled to a free credit report a year from each of the three bureaus, but they must pay for their scores.
