Wells Fargo & Co., the nation’s biggest home lender, sold servicing rights to $12.2 billion of reverse mortgages to Walter Investment Management Corp.
The loans are owned by Fannie Mae, and Wells Fargo will continue to service other reverse-mortgage loans in its portfolio, Vickee Adams, a spokeswoman for the San Francisco-based bank, said in an e-mail. Terms weren’t disclosed in a statement today from Tampa, Florida-based Walter.
Wells Fargo was ranked as the largest U.S. residential mortgage servicer at the end of December, with contracts on $1.87 trillion in unpaid home loans. The bank said in 2011 that it would stop originating reverse mortgages. Today’s transaction won’t significantly affect earnings, Adams said.
Wells Fargo’s decision to exit the business was tied to the possibility that home values would fall, according to its statement at the time. Prices declined 5.3 percent from the end of that month through March last year before rebounding 9 percent through January, according to the S&P/Case-Shiller index of data from 20 U.S. cities.
Today’s transaction, which involves 76,000 loans, will double the size of Walter’s serviced book and be completed in the third quarter, according to the statement.
Reverse-mortgage lenders issue loans to homeowners and accept real estate equity as collateral, allowing borrowers, age 62 or older, to remain in their homes and receive either a lump-sum payment or a stream of income. Mortgage servicers handle billing and collections on behalf of lenders or investors that own the loans and oversee foreclosures.