Due to regulatory changes that resulted in increased complexity in operating joint ventures, Wells Fargo Ventures, a wholly owned operating subsidiary of Wells Fargo Bank, is withdrawing from its eight joint ventures in mortgage lending.
Up until three years ago, such joint ventures were regulated on the federal level. However, when the Dodd-Frank Act went into effect in 2010, they were then subject to state regulations, which vary considerably from state to state.
In a statement, the bank said the increased complexity of having to comply with a patchwork of state regulations was part of the reason it was getting out of the joint venture business entirely.
As a result of the decision, the company plans to cut about 300 positions.
The eight joint ventures contributed approximately 3% of Wells Fargo's mortgage volume. Each of the joint ventures operated as a separate, independent business. Some of the firms involved in the joint ventures will go out of business, while others will buy the business from Wells Fargo.
According to a Bloomberg News report, HomeServices of America Inc., the real estate brokerage unit of Warren Buffett's Berkshire Hathaway Inc., which is Wells Fargo's largest shareholder, has agreed to take over the bank's stake in their joint venture – the largest of the eight.
The transition is expected to take 12 to 18 months, Wells Fargo said.
"This decision reflects our response to new operating realities and our commitment to continuously improving our business model," said Franklin Codel, executive vice president, head of mortgage production, for Wells Fargo. "As a leader in home lending, we want to ensure we're always in the best position to help Americans achieve the dream of homeownership."
As per a company press release, the eight joint ventures that Wells Fargo Ventures will be withdrawing from include the following:
Bankers Funding Co., LLC;
Colorado Mortgage Alliance, LLC;
DE Capital Mortgage, LLC;
Home Services Lending, LLC;
Military Family Home Loans, LLC;
Prosperity Mortgage Co.;
Premia Mortgage LLC; and
Private Mortgage Advisors, LLC.
The bank said joint venture customers with loans in already in process will continue to have their applications processed by the joint venture and may call their mortgage consultant with questions.
Wells Fargo, which originated $112 billion in home loans in the second quarter, said the decision would not affect its own retail mortgage lending and relationships with outside correspondent lenders.