Wednesday, March 6, 2013

Wells Fargo not feeling pressured to sell mortgage-servicing rights

Wells Fargo might want to "test" the sale of its mortgage-servicing rights, the bank's chief financial officer said, opening up the possibility that Wells might join the likes of Bank of America and other lenders that have  sold off the servicing of some of their loans.

But Wells Fargo is not under any capital pressure to sell the rights, Tim Sloan said during an investor conference that was broadcast online Tuesday. Sloan did not say when Wells might start selling the rights, if it does at all.

Some lenders have been selling off the rights to service the mortgages they originate. For example, Bank of America in January said it signed agreements to sell the servicing rights on 2 million home loans worth a total of roughly $306 billion.

Fannie Mae, Freddie Mac and Ginnie Mae owned some of those Bank of America loans, while the rest of the mortgages were part of securities not backed by the government-sponsored enterprises.

San Francisco-based Wells, the U.S.'s largest residential mortgage lender and servicer, is heavily focused on cross-selling its products and services. In his presentation, Sloan touted that Wells had record cross-sales in the fourth quarter, with its retail-banking operation cross-selling 6.05 products per household.

The bank's goal is eight products per household, he said.

"The longer a customer has been with Wells Fargo, the more products that they have with us," Sloan said.

But, if Wells no longer services a homeowner's mortgage, it could mean a lost opportunity to cross-sell to them.

Sloan made it sound like any decision by Wells to sell the rights to service its mortgages might not be made in the near future.

"We don't feel that we're under any terrible pressure to sell our MSR," he said. "We've got an adequate amount of capital.

"We thought it was a good idea to hold onto the servicing, because in a low (interest) rate environment like we've been in, which creates a tremendous amount of refinance volume, generally you get the first call as a servicer."

In 2012, Wells serviced $1.87 trillion in residential mortgages, including those owned by other lenders.