Well Fargo Bank announced today that it
will immediately begin winding down its marketing services and desk rental
agreements with real estate firms, builders, and some other referral sources. Franklin Codel, executive vice president for
mortgage production said the company was exploring a number of new options for
enhancing and strengthening those relationships over the long term.
A press release issued by the company
said that the withdrawal decision was made as a result of increasing uncertainty
surrounding regulatory oversight of these types of arrangements "and as part of
Wells Fargo's ongoing efforts to simplify the process that customers experience
as they weigh all of their choices when shopping for a mortgage."
The decision is presumed to arise out of a series of
enforcement decisions made by the Consumer Financial Protection Bureau regarding
alleged kickbacks between various actors in real estate transactions. In the most recent of these CFPB charged that
PHH, a mortgage lender, received payments from mortgage insurance companies to
which it referred business. The
kickbacks were in the form of reinsurance premiums that the mortgage insurers
paid to PHH's reinsurance subsidiary.
CFPB presented evidence that the company had referred substantially more
business to insurers that purchased reinsurance from its subsidiary than to
those that did not and the reinsurance did not transfer risk to that subsidiary
commensurate with the premiums it was paid.
Wells Fargo as well as JPMorgan Chase were subjects of a
similar consent order last January in which CFPB charged they and a Wells Fargo
employee had conducted an illegal marketing services kickback scheme with a now
defunct title company. That company had
provided bank loan officers with cash and services in return for referring
homebuyers to them for closing services.
Wells Fargo agreed to pay $24 million in civil penalties and 10.8 million
in redress to consumers over that decision.
These and other actions were brought under RESPA which
prohibits the payment of kickbacks in exchange for referrals in the real estate
market. We do not know the terms of the
marketing services agreements Wells Fargo maintained with its referral sources
but these paybacks for referrals can take the form of cash, travel awards, gifts,
or services such as providing refreshments at real estate agent open houses or caravans.
Codel
statement continued, "Because we value our
strong relationships with real estate professionals and builders, the decision
to exit these marketing services agreements was difficult, but we are taking
this action to ensure that we continue to conduct our business in a way that
represents the best interests of all of our customers and clients. We believe
the best way to earn the relationship with real estate firms and builders is
through timely, dependable service delivered by the best team in the business."
The decision is effective Aug. 1 and
the wind down will occur over the following 90 days. The company said termination
of these marketing services agreements is not expected to have a material
impact on Wells Fargo's total mortgage production.