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The Consumer Financial Protection Bureau is expected to be inundated with comments on how to rework the proposed 3% cap on loan origination points and fees.
February 4 -
Wells Fargo and Citigroup are laying off hundreds of employees in their mortgage units as rising interest rates cause home loan refinances to plummet. More layoffs by banks with heavy exposure to mortgages are expected this year.
July 19
Wells Fargo (WFC) said Thursday it will terminate eight mortgage joint ventures including a partnership with HomeServices Lending, an affiliate of Berkshire Hathaway.
Wells said its 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.
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. "It's a model that became more complex and risky."
Wells says the eight joint ventures contributed 3% to its mortgage production in the second quarter.
Roughly 300 employees will be affected as the eight joint ventures are wound down over the next 12 to 18 months.
Jim Stavenger, a senior vice president and head of Wells Fargo Ventures, said the bank will work to retain as many employees as possible, though the unit itself will ultimately be eliminated.
The eight ventures are Bankers Funding; Colorado Mortgage Alliance, DE Capital Mortgage; Home Services Lending; Military Family Home Loans; Prosperity Mortgage, a joint venture with the real estate firm Long & Foster; Premia Mortgage and Private Mortgage Advisors.
Home Services said in a separate press release that it will become a wholly-owned subsidiary of HomeServices of America, a Berkshire Hathaway affiliate. Berkshire Hathaway is one of Wells Fargo's largest shareholders.
