Wells Fargo & Co. is ending the last of its mortgage joint ventures, including one in Minneapolis, citing the changing mortgage landscape and heavier state and federal oversight.
The decision means that as many as 300 Wells Fargo employees could lose their jobs or be transferred elsewhere in the company. Almost half of the those employees are in the Twin Cities, where Wells Fargo was in a joint venture with Minneapolis-based HomeServices of America, a Berkshire Hathaway affiliate.
Wells Fargo estimates that it will take 18 months to wind down its presence within the eight ventures. The company emphasized Thursday that the employees are not being laid off. The job eliminations won’t be immediate, company officials said, and employees will get help finding other positions in the company.
The local joint venture with Wells Fargo — HomeServices Lending — does business in the area as Edina Realty Mortgage. Executives with Edina Realty said Thursday that the venture will become a wholly owned subsidiary of HomeServices of America, and its operations won’t be affected.
Minneapolis-based HomeServices of America is the second-largest independent residential real estate brokerage in the country with about 29 brokerages and $40 billion in annual sales. The company has been expanding rapidly, snapping up brokerages around the country as it builds a national brand.
HomeServices Lending is licensed in 36 states and originates $3.5 billion to $4 billion in mortgages annually. Todd Johnson, president of HomeServices Lending, said he has great respect for Wells Fargo, but parting at this time makes sense for both companies.
“We are of the size and scale where we do not need to be in a joint venture,” Johnson said.
The mortgage joint ventures are vestiges of a business model in which Wells Fargo would set up independent legal entities with real estate brokerages, builders and financial service companies to originate, process and fund home loans. The bank estimates it formed 80 to 100 such entities over the years and started withdrawing from them in 2011.
The final eight ventures are the largest of their kind with Wells Fargo and generate about 3 percent of its mortgage production, the bank said.
Earlier this week, Wells Fargo confirmed that it’s laying off 34 people in Minneapolis as it pares 356 jobs from its home mortgage division across the country due to slowing refinance activity. Executives with the bank cautioned that there could be more cuts if mortgage rates rise.
“If rates go up higher or remain at the level they’re at … it’s likely in the future there will be additional actions,” said Franklin Codel, who oversees loan production for Wells Fargo Home Mortgage.
About 120 to 140 of the 300 affected Wells Fargo employees work in Wells Fargo’s south Minneapolis campus and at the Metropoint complex in St. Louis Park, said Jim Stavenger, senior vice president and head of Wells Fargo Ventures, the bank subsidiary exiting the joint ventures. Most of the employees are high-level underwriters or in management oversight and risk and compliance.
The rest work in Des Moines, where Wells Fargo Home Mortgage is based, and in San Bernardino, Calif.
The other seven joint ventures Wells Fargo is exiting are: Bankers Funding Co., Colorado Mortgage Alliance, DE Capital Mortgage, Military Family Home Loans, Prosperity Mortgage Co., Premia Mortgage and Private Mortgage Advisors.