TheMReport — News and strategies for the evolving mortgage marketplace.
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FEATURE funded 6.4 million mortgages since the housing crisis started about three-and-a-half years ago, observed Mike Heid, EVP of the company. Additionally, Wells Fargo has Banking on Agility T "The market will determine whether [Wells is] good at what it does. That's the nature of a free market. Someone's going to rise to the top and someone will fall by the wayside. If Wells can be agile enough, they'll succeed, as will those that work with them," said Garritano, founder of the Progress in Lending Association, designed to promote thought leadership in the mortgage space. "The opposite also could be true; it's the nature of the game." Having said that, Garritano ony Garritano's take on Wells is more temperate. "The market will determine whether [Wells is] good at what it does. That's the nature of a free market. Someone's going to rise to the top and someone will fall by the wayside. If Wells can be agile enough, they'll succeed, as will those that work with them." — Tony Garritano, Progress in Lending Association believes the fact that Wells carries 40 percent of the market helps to consolidate it. "While it gives [Wells] more power and authority over how lending is done, if I'm a small- to medium- sized lender, I now have greater flexibility," he said. In other words, he explained, previously, when, say, the top 20 lenders were more evenly matched in terms of market share, originators had to compete against 20 different processes. "With the consolidation in the market, sure, the big lenders are becoming bigger, but I think it also gives small- to medium-sized lenders, like community banks and credit unions, an opportunity to innovate and do something really different to stand out," he said. For instance, they could offer a more automated mortgage process, leverage technology to enhance customer service, or extend a shorter close time or greater availability at the point of sales, Garritano pointed out. 36 | THE M REPORT position is construed, even Thornberg, despite his bullish take on the bank, acknowledged that industry supremacy—by Wells or anyone—isn't necessar- ily for the best. "We need to get away from this sort of market that's dominated by a few big players," he said. "I think, in general, if we want to wean ourselves off Fannie Mae and Freddie Mac, we need to diver- sify. Obviously, we're not." However Wells' market Domination Downsides F 40 percent of the market "would seriously raise the antennae of the Financial Stability Oversight Council," which, according to the U.S. Department of the Treasury, was established under the Dodd-Frank Act to provide comprehensive monitoring to ensure stability of the nation's financial system. "The [FSOC] or his part, Rossi believes that any institution carrying would ask themselves whether [such dominance] is something they should allow," Rossi said. Has that happened? "Among regulators, I've talked to private- ly about this issue, I think there are concerns that prompt their attention," he said. For instance, he cited anti-competitive issues that could stem from Wells' success, creating an environment that would position it to assert greater market power than oth- ers on pricing and products. "I think that will have repercus- sions and create more tension in the marketplace," Rossi said. Perhaps, but Heid said market share growth is an outcome of providing good service to cus- tomers and clients who choose to bring Wells first-time and repeat home lending business. "We do our best to deliver well, and in a fair and responsible way," he said. In any event, Wells' promi- doesn't think it is. "They're not keeping mortgages in house; they're mostly acting as a con- duit," he said. Rossi begs to differ. "Yes, that's exactly it," he said of Wells' lurching into the too big to fail zone. "Any time a single institu- tion in a particular sector—such as mortgage origination—domi- nates like Wells does, you should start to ask why." Wells Fargo is a too big to fail bank, Mark Williams flatly stated. Williams, executive in residence at Boston University's School of Management, where he also teaches finance, said that as Wells aggressively grows its mortgage business, "it's become increasingly dangerous—particu- larly because Wells Fargo is an FDIC-insured banking behemoth that continues to grow larger post 2008 banking crisis." The acquisition of Wachovia, "the risk-taking" bank from the South, has expanded Wells Fargo's national deposit base, reach, and risk profile, said Williams. "The bank is intertwined, coast to coast, in residential and business lending and deposit taking, increasing its risk taking at taxpayer expense," continued Williams, a former Fed bank examiner. "JPMorgan's done it by expanding risky trading, while Wells Fargo expanded mortgage lending in a weak economy." However, post-crisis, Wells nence, of course, might prompt some to wonder whether the bank's treading into so-called too big to fail territory. Thornberg Fargo was designated by the FSOC as financially significant to the stability of the financial system, explained Williams. "The bank's strength or weakness impacts the economy," he said. "An aggressive foray into mortgages might show profit if the economy turns around, but what if Europe or China push the global economy into a new recession? Should the nation's biggest bank by stock market value be allowed to take such risks?"