Wells Fargo pulls out of Marketing Agreements with Agents, Builders
Well Fargo Bank announced today that itrnwill immediately begin winding down its marketing services and desk rentalrnagreements with real estate firms, builders, and some other referral sources. Franklin Codel, executive vice president forrnmortgage production said the company was exploring a number of new options forrnenhancing and strengthening those relationships over the long term.</p
A press release issued by the companyrnsaid that the withdrawal decision was made as a result of increasing uncertaintyrnsurrounding regulatory oversight of these types of arrangements “and as part ofrnWells Fargo’s ongoing efforts to simplify the process that customers experiencernas they weigh all of their choices when shopping for a mortgage.”</p
The decision is presumed to arise out of a series ofrnenforcement decisions made by the Consumer Financial Protection Bureau regardingrnalleged kickbacks between various actors in real estate transactions. In the most recent of these CFPB charged thatrnPHH, a mortgage lender, received payments from mortgage insurance companies tornwhich it referred business. Thernkickbacks were in the form of reinsurance premiums that the mortgage insurersrnpaid to PHH’s reinsurance subsidiary. rnCFPB presented evidence that the company had referred substantially morernbusiness to insurers that purchased reinsurance from its subsidiary than tornthose that did not and the reinsurance did not transfer risk to that subsidiaryrncommensurate with the premiums it was paid.</p
Wells Fargo as well as JPMorgan Chase were subjects of arnsimilar consent order last January in which CFPB charged they and a Wells Fargornemployee had conducted an illegal marketing services kickback scheme with a nowrndefunct title company. That company hadrnprovided bank loan officers with cash and services in return for referringrnhomebuyers to them for closing services. rnWells Fargo agreed to pay $24 million in civil penalties and 10.8 millionrnin redress to consumers over that decision.</p
These and other actions were brought under RESPA whichrnprohibits the payment of kickbacks in exchange for referrals in the real estaternmarket. We do not know the terms of thernmarketing services agreements Wells Fargo maintained with its referral sourcesrnbut these paybacks for referrals can take the form of cash, travel awards, gifts,rnor services such as providing refreshments at real estate agent open houses or caravans.</p
Codelrnstatement continued, “Because we value ourrnstrong relationships with real estate professionals and builders, the decisionrnto exit these marketing services agreements was difficult, but we are takingrnthis action to ensure that we continue to conduct our business in a way thatrnrepresents the best interests of all of our customers and clients. We believernthe best way to earn the relationship with real estate firms and builders isrnthrough timely, dependable service delivered by the best team in the business.”</p
The decision is effective Aug. 1 andrnthe wind down will occur over the following 90 days. The company said terminationrnof these marketing services agreements is not expected to have a materialrnimpact on Wells Fargo’s total mortgage production.
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