Wells Fargo to cut ties with independent brokers
A customer prepares to leave a Wells Fargo Bank branch office on July 12, 2012 in Daly City, Calif.
Jeff Horwich: In about a half hour, the big story will be earnings at JPMorgan Chase -- we're all curious how big a hit it took from that massive trading loss a few months ago. Wells Fargo should put out results about the same time. This comes as the Justice Department has announced a $175 million settlement with the bank. Wells Fargo allegedly discriminated against tens of thousands of African-American and Hispanic borrowers between 2004 and 2009.
From Washington, here's Marketplace's David Gura.
David Gura: Wells Fargo says it decided to settle to avoid a long court battle. The bank is denying allegations it offered white borrowers better terms.
Guy Cecala: That’s probably due to the fact that the loans in question were made by mortgage brokers.
Guy Cecala is with Inside Mortgage Finance. Mortgage brokers are independent parties who sold Wells Fargo loans. So, the bank has come to this conclusion:
Cecala: If it is too hard to police mortgage brokers, we are not going to deal with mortgage brokers going forward.
Cecala says choosing to cut ties with independent brokers is not going to hurt Wells Fargo’s bottom line, it is the largest lender in the U.S.
Cecala: They’re in a position now where they can pick and choose a little bit about what business they want to do.
But it will be a big blow to independent brokers. In the first quarter of this year, Wells Fargo accounted for 20 percent of their business.
In Washington, I’m David Gura, for Marketplace.