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Wells Fargo to Sell Most of Its CRE Loan Servicing Business to Trimont

A Wells Fargo & Co. bank branch in Dallas, Texas, U.S., on Monday, July 10, 2017. Wells Fargo & Co. is scheduled to release earnings figures on July 14. Photographer: Cooper Neill/Bloomberg (Cooper Neill/Bloomberg)

(Bloomberg) -- Wells Fargo & Co. agreed to sell most of its commercial mortgage servicing business to Trimont LLC, ceding the title of biggest US commercial and multifamily mortgage servicer to the Atlanta-based firm. 

Trimont will buy Wells Fargo’s non-agency third-party commercial mortgage servicing business, the companies said in separate statements Tuesday. The firms didn’t include terms for the deal, which they expect to complete early next year, but Trimont Chief Executive Officer Bill Sexton said Tuesday his firm will take over servicing for about $475 billion of loans.

Trimont said the deal will make it the single largest servicer in the US commercial real estate industry, up from 10th place at the end of last year, according to Mortgage Bankers Association rankings. The transaction accelerates a long-running transfer of loan servicing, which involves tasks such as billing and collections, from the banking sector to nonbanks.

Värde Partners has owned Trimont since 2015, and affiliated Värde funds are providing capital to help Trimont complete the transaction, according to Jim Dunbar, a Värde partner and head of real estate lending at the firm. The transaction will roughly triple Trimont’s loans under management to more than $715 billion. 

“Over the next three years, there’s about $2 trillion of debt coming due, and as those loans come due, the combined platform is positioned well to capture an increased amount of services and provide those services to clients,” Dunbar said in an interview. He added that most of the loans being transferred to Trimont are commercial mortgage backed securities, including real estate collateralized loan obligations. 

For Wells Fargo, it’s the latest move to narrow its focus under Chief Executive Officer Charlie Scharf. The bank long sought to dominate the real estate lending business on both the commercial and residential side, and the sale announced Tuesday mirrors an effort announced last year to scale back home-loan servicing. 

“This transaction is consistent with Wells Fargo’s strategy of focusing on businesses that are core to our consumer and corporate clients,” Kara McShane, who oversees the bank’s commercial real estate unit, said in her firm’s statement, adding that the bank remains committed to its “market-leading commercial real estate business.”

Wells Fargo shares recovered from an earlier decline following Tuesday’s announcement, and are up almost 15% this year.  

The fourth-largest US bank serviced and sub-serviced $543 billion in commercial mortgages for others as of June 30 — a figure that included third-party agency and government-sponsored loans it will continue to service — according to a company filing earlier this month. Wells Fargo will also continue to service the commercial-property loans on its balance sheet, according to the statement Tuesday.

Earlier in Scharf’s tenure, Wells Fargo sold its asset manager, corporate-trust unit and student-loan book after concluding those operations weren’t consistent with the lender’s strategy. He’s also earmarked some businesses for growth, including investment-banking — an opportunity he said earlier this year is “staring us in the face.” 

(Updates with context, Wells Fargo shares starting in fourth paragraph.)

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