Today Wells-Fargo announced that they are exiting the wholesale lending business, leaving a gaping hole in the wholesale landscape. The exit follows the settlement of a lawsuit between the Department of Justice and Wells Fargo. The lawsuit stemmed from claims relating to mortgages priced and sold to Wells-Fargo by independent brokers through their wholesale channel. From the press release:
“While not part of the DOJ settlement, Wells Fargo, on its own volition, also announced today that on July 13 it will discontinue funding mortgages that are originated, priced and sold by independent mortgage brokers through its mortgage Wholesale channel. Mortgages sold by independent brokers in this manner currently represent five percent of the Company’s home mortgage funded volume. Mortgage brokers operate as independent businesses and are not employed by Wells Fargo. Therefore, Wells Fargo cannot set loan prices for independent mortgage brokers nor control the combined effect of the negotiations that thousands of these independent mortgage brokers conduct with their customers. After July 13, 2012, the Company will no longer accept new applications for loans originated by independent mortgage brokers through its Wholesale channel, but will work to ensure existing applications are processed and closed.
“Wells Fargo is settling this matter because we believe it is in the best interest of our team members, customers, communities and investors to avoid a long and costly legal fight, and to instead devote our resources to continuing to contribute to the country’s housing recovery,” said Mike Heid, president of Wells Fargo Home Mortgage. “Wells Fargo takes pride in serving the home ownership needs of all of our customers, and we are fully committed to fair and responsible lending. Through our separate decision to no longer fund mortgages through independent mortgage brokers, we can control how that commitment is met on every mortgage that Wells Fargo makes.””
Wells was one of the largest players in the wholesale space, and their impending exit has left many brokers scrambling to find an outlet for their loans. Other major lenders have also shuttered their wholesale operations in the past few years. Bank of America, Citibank, and JP Morgan Chase all ended their wholesale operations in the recent past.
In the wake of the announcement, TMS Funding, the wholesale branch of Total Mortgage, has experienced a record call volume from brokers looking for a wholesale lender.