The Bank of Fayetteville Outsources Mortgage Lending

The Bank of Fayetteville and San Francisco-based Wells Fargo & Co. entered into a partnership agreement on Nov. 1.

With $549 billion in assets, Wells Fargo has begun to place mortgage lenders/originators at BOF locations to handle the community bank’s home mortgage business and become the bank’s exclusive secondary market buyer for its home loans.

BOF President and CEO Mary Beth Brooks said Wells Fargo will lease space from the bank. Three former BOF employees now work for Wells, she said, and over the next several months up to four more people will transition to Wells.

Brooks is offering alternative bank positions to lenders that don’t want to change employers, she said.

The agreement is the first of its kind in Arkansas and the first anywhere with a community bank of this size, said Frank Lawrence, Wells Fargo’s state sales manager.

The agreement is akin to a wealth management firm, such as Raymond James or Smith Barney, placing employees within a community bank to service its customers.

Wells Fargo has about 2,300 loan production offices nationwide, and was the second largest mortgage lender in Benton and Washington counties for 2006 (see story, p. 11). The bank also operates nearly 3,300 retail banks in 23 states but has none in Arkansas.

About 19 percent of Wells’ business is home mortgage and home equity, while 33 percent is “community” banking.

Wells Fargo has made similar agreements with larger banks in larger markets, Lawrence said, though he couldn’t name specific banks.

Wells Fargo Home Mortgage corporate media liaison Debora Blume declined to comment on the trend.

Lawrence said Wells Fargo will close about $175 million in home loans in Arkansas this year through its LPOs.

In 2006, BOF closed 408 mortgages worth a combined value of $144 million, but that includes commercial, construction and development loans. The annual home mortgage business that eventually gets sold on the secondary market is about $40 million, Brooks said.

According to the Federal Deposit Insurance Corp., BOF had $37.6 million in residential loans as of June 30, down 37 percent from $59.9 million a year earlier. Its commercial and industrial loans have increased to $58.8 million, up 49 percent from $39.3 million in mid-2006.

The agreement is a win-win, Brooks said. The way BOF has been doing business, it has to charge slightly higher closing costs and rates, and it takes longer to close a loan because the bank has to “shop it” on the secondary market with about 30 lenders. Wells has one of the most diverse and mature mortgage product lines in the nation, so lenders can get alternative or “odd” loans closed in 15-20 days, she said.

Wells will get a consistent supply of mortgage business from BOF’s loyal customer base.

BOF will continue to make commercial and construction loans and participate them out as usual, she said. Wells Fargo will refer business to the retail bank and vice versa.

As of June 30, BOF had $426.1 million in assets, up 17.5 percent from $362.4 million a year earlier. The bank controls 8.69 percent of the deposit market share in Washington County.