Following news in August that Wells Fargo would be laying off about 2,300 mortgage workers, most of them in its servicing division, the bank is reportedly gearing up to sell servicing rights on $41 billion of loans.
The rights are for government-backed home loans, according to a Bloomberg News report, citing anonymous sources.
During an investor conference in New York on Sept. 9, Tim Sloan, chief financial officer for Wells Fargo, said the bank would be selling off some of its servicing rights in the coming quarters, according to the report.
"It will primarily be focused, if we go ahead and execute, on mortgage-only customers so we don't have any confusion from a relationship standpoint," Sloan told investors.
Two of the other large U.S. mortgage banks, Bank of America Corp. and Ally Financial Inc., have also recently indicated that they would be selling mortgage servicing rights (MSRs) in the coming months. The larger banks have been divesting themselves of their mortgage servicing operations in part due to increased risk stemming from new, stricter mortgage servicing regulations promulgated by the Consumer Financial Protection Bureau and other state and federal regulators.
The new rules require that banks fund the assets with more equity when their holdings reach a certain threshold. They also include new regulations outlining how servicers interact with customers. Failure to comply with these new regulations could result in fines, civil suits and legal action on the part of regulators.
Ocwen Financial Corp., JPMorgan Chase & Co. and Walter Investment Management Corp. are among the potential buyers of Wells Fargo's MSRs; however, many smaller lenders and servicers have also been snapping up MSRs as well, in order to stabilize their revenue as origination volume dives on higher interest rates.
