Morgan Stanley plans to bring its mortgage origination business in-house, as the bank ramps up the business to create a bigger presence in the mortgage market.  

According to the Reuters article by Olivia Oran, Morgan Stanley wants to bring the business in-house to improve customer service and generate more mortgages, citing two people familiar with the matter.

“Morgan Stanley executives hope that handling originations in-house will smooth out the process and give the bank a chance to market other products and services to wealthy clients," the article stated. 

Before bringing the business in-house, Morgan Stanley used PHH Corp. as a third-party provider for its originations.

PHH, however, has slowly been exiting the private-label origination business after “exhaustive consideration of the available alternatives,” the company previously stated.

In November last year, PHH said it would begin the exit from the private-label business and intended the process to be substantially complete by the first quarter of 2018.

The decision from PHH also came after its future business relationship with Morgan Stanley was put in question in early 2016.

PHH revealed in its earnings release in April 2016 that while Morgan Stanley renewed their current contract until Oct. 31, 2017, they informed PHH that they would be assessing the agreement upon the completion of that contract.

Now more than a year later, Morgan Stanley decided to bring the business in-house.

Although the relationship between Morgan Stanley and PHH isn’t over, it will simply look different.

PHH pulled away from the private label originations business to focus on mortgage subservicing and portfolio refinancing.

Reuters noted in its coverage that Morgan Stanley will continue to use PHH for other functions like mortgage servicing.

The choice to move its mortgage operations in-house also follows the bank’s choice back in June to go digital.

At the time, Naureen Hassan, Morgan Stanley’s chief digital officer for wealth management, said during a presentation at the Morgan Stanley U.S. Financials Conference that it wants to be a big player in mortgage lending.

According to Hassan’s presentation, currently, 98% of Morgan Stanley’s clients do not have a mortgage through Morgan Stanley, and the company views that as an opportunity for significant growth.

The major key to capturing that growth, Hassan explained, is to roll out a digital mortgage application process, following recent industry trends.  The digital mortgage is projected to launch in the first half of 2018.

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