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Wells Fargo Bank and Prospect Mortgage, LLC announced Thursday their intentions to withdraw from marketing activities that depend on marketing services agreements (MSAs) due to regulatory uncertainty and Real Estate Settlement Procedures Act (RESPA) interpretations.
Wells Fargo's decision will take effect August 1 with a wind down period over the following 90 days. Prospect expects to exit the MSA space by the end of the third quarter.
According to the announcement from Wells Fargo, the company will withdraw from mortgage marketing services and desk rental agreements with real estate firms, builders, and certain other referral sources. Wells Fargo based their decision on high levels of uncertainty in regulatory oversight in MSA arrangements. They also believe that this decision will support their efforts to simplify the mortgage shopping experience among their customers.
“Because we value our strong relationships with real estate professionals and builders, the decision to exit these marketing services agreements was difficult, but we are taking this action to ensure that we continue to conduct our business in a way that represents the best interests of all of our customers and clients," said Franklin Codel, EVP for mortgage production at Wells Fargo. "We believe the best way to earn the relationship with real estate firms and builders is through timely, dependable service delivered by the best team in the business.”
The bank says that the termination of these marketing services agreements is not expected to have a huge impact on Wells Fargo’s total mortgage production.
“Real estate firms and builders always have been—and will continue to be—very important to Wells Fargo’s retail mortgage operations, and we are exploring a number of new options for enhancing and strengthening those relationships over the long term,” Codel said.
Prospect Mortgage, an originator in the purchase money mortgage business also intends to discontinue marketing activities that depend on marketing services agreements.
"Given the uncertainty surrounding the use of MSAs, Prospect has made the decision to discontinue marketing activities that depend on these agreements," said Doug Long, president of national lending at Prospect. "This decision has no impact on our continuing efforts and commitment to deliver the highest level of value and service to our customers and clients."
Prospect notes that their decision was based on uncertainty among recent interpretations of RESPA requirements to the rules and requirements applicable to MSAs.
"Prospect has taken every precaution to ensure that it is complying with the rules and guidance under applicable law," the annoucement said. "However, in light of these recent rulings, Prospect believes that MSAs are no longer a viable marketing tool for the industry."
The company also mentioned that it knows the homebuying process can be intimidating, especially for first-time buyers.
"For that reason, Prospect values its relationships with real estate professionals and other service providers that provide the highest quality service to consumer," the company said. "Prospect will continue to work closely with industry partners to increase the understanding of the process through financial education, improved products and tools that make the purchase of a home or the refinance of a mortgage a reality for Americans and reduce the risk inherent in such transactions."
"We have worked very hard at Prospect to establish strategic priorities for the company that will allow us to succeed in this new era for our business," Long said. "Prospect prides itself on our commitment to providing the highest level of customer service. We provide value to our customers through our ability to offer a broad array of products and the deep industry knowledge of our professionals."
