(Update 1 clarifies the statement made last week by Wells Fargo.)
JP Morgan Chase & Co. (JPM)
announced Tuesday it would cease its wholesale lending operations to brokers. National Mortgage News broke the story late Tuesday, and a Chase spokesperson forwarded to HousingWire
a copy of an internal company memo explaining the shift. In a letter to employees signed by Dave Lowman, who runs home lending, and Pat Sheehy, a representative for business-to-business, the bank said it would continue to purchase retail-oriented loans -- but not broker-originated loans -- through its correspondent channel.
"We believe that our customers are best served when a mortgage officer works directly with them, explains our products clearly and then helps them carefully evaluate the choices in light of their personal financial situation," the memo read, in part. "Homeowners with loans originated by Chase professionals and other retail-focused teams have historically performed better than those originated by brokers."
The bank explained the shift was necessitated not only by a concern for the quality of service at the time of origination, but by an increase in Chase's presence as a branch-based franchise. Chase has historically relied on brokers and third-party originators when it had just 600 bank branches in four states -- as recently as five years ago -- according to the memo. With the addition of Washington Mutual
, Chase's bank branch presence flourished and now stands at 5,000 branches serving 23 states, the memo said. With such a large branch presence, Chase would appear to be in a better position to service more borrowers on a face-to-face basis.
"We know that a home loan often is core to a family's long-term relationship with their bank," officials said. "And we believe that Chase loan officers -- who know our customers and products best -- are in the best position to help families make choices to achieve and sustain homeownership."
The Chase memo confirmed the bank would retain some affected underwriting and operations staff to handle the influx of refinance customers, but acknowledged some sales and other support jobs were being eliminated. A spokesperson could not estimate the number of jobs that would be shed at the time this story was published, but confirmed the bank would attempt to redeploy talent to handle the surge of refinance applications -- which she said has tripled. "We feel confident we can move people into that area of need," she said.
Wells Fargo & Co. (WFC)
was the latest to change the face of wholesale lending by banking giants. Last week it exited nonconforming lending through its wholesale channel
due to “low market demand and higher risks,” according to a statement from the banking giant Thursday. The move was said to be temporary by officials, though no details were released on when the bank may re-enter the business and the bank is "still very much in the wholesale business," according to a company spokesperson. Citigroup Inc. (C)
said back in October 2008 it would severely limit its wholesale business
to a list of only 1,000 brokers. And Bank of America Corp. (BAC)
one year earlier in October 2007 said it would shutter its wholesale lending division
in favor of a renewed focus on retail originations.
Diana Golobay at firstname.lastname@example.org
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.