About 210 people work at the Edward Jones Mortgage office in St. Louis Park.
Wells Fargo & Co. is dissolving Edward Jones Mortgage, a joint venture it formed with St. Louis-based investment firm Edward Jones, and is closing the venture’s St. Louis Park office where about 210 people work.
The San Francisco-based bank issued a statement Thursday saying it decided to dissolve several of its joint ventures that originate, process and fund home loans “after careful analysis of market conditions and the impact of the regulatory environment on business.”
Most of the alliances were shuttered in the second half of 2012, it said, and the St. Louis Park operation is scheduled to close April 12.
Executives at Edward Jones Mortgage could not immediately be reached. The bank said the St. Louis Park office is the only office of the joint venture, which was formed in 1998.
Guy Cecala, publisher of Inside Mortgage Finance, said Wells Fargo closed down about 100 joint ventures akin to Edward Jones Mortgage last year.
Many of the mini mortgage companies were historically set up with real estate agents, Cecala said, and many lenders formed them. The model proliferated during the go-go mortgage days during the housing boom.
“It was a way to refer mortgage business to Wells Fargo without running afoul of anti-kickback provisions,” Cecala said. “If you’re a lender, you can’t pay somebody for a loan.”
“Now that there’s this whole regulatory concern everybody is re-examining them and saying they don’t make sense,” he said.
New mortgage rules limit fees that can be tacked onto mortgages, for instance.
Cecala said he didn’t know how many such joint ventures Wells Fargo has remaining or what their fate might be, and Wells Fargo declined to say.
Wells Fargo’s statement said the bank is still committed to the joint-venture model, which it called “an excellent opportunity” for Wells Fargo Home Mortgage and its partners. But Cecala said he didn’t think the model really panned out for the bank.
The joint ventures weren’t considered correspondent or wholesale lending, he said, and aren’t related to Wells Fargo’s decision last July to shut down its wholesale mortgage unit, which funds mortgages that are originated, priced and sold by independent mortgage brokers.
The bank continues to operate its separate correspondent mortgage business, which buys mortgages from brokers who already have closed the loans.
Not everybody’s ditching the joint-venture model, Cecala noted. Last month homebuilder KB Home formed a joint venture company with lender Nationstar.
Wells Fargo is the largest home lender to survive the nation’s mortgage industry meltdown, and has been getting a lot of business as low interest rates propelled people to refinance their home loans. But mortgage originations have been cooling.
At an investors conference on Wednesday, Wells Fargo CFO Tim Sloan said the declines started in the third quarter and are likely to continue “because the pace at which refinancing activity is declining in the entire industry is a little bit faster than the new-purchase money activity, though that’s picking up.”