Wells Fargo Buys Servicing Rights as Seneca's Mortgage Bet EndsBy and
Seneca said to exit business with $51 billion rights sale
Blackstone’s GSO Capital Partners and others started Seneca
Wells Fargo & Co., the largest U.S. home lender, bought about $51 billion in servicing rights from an investment firm connected to Blackstone Group LP’s credit arm in a deal that depletes the investor’s mortgage portfolio.
Wells Fargo bought the rights from Seneca Mortgage Investments, with the underlying loans all guaranteed by Fannie Mae or Freddie Mac, the San Francisco-based bank said Thursday in a statement that didn’t include terms. The servicing rights will be reflected in Wells Fargo’s third-quarter results.
“Mortgage servicing is an attractive, core business for Wells Fargo, and this transaction provides an opportunity for us to strategically enhance our servicing portfolio,” Franklin Codel, head of consumer lending, said in the statement.
Some Wall Street banks have been buying their way back into the business of servicing U.S. home loans after seeking to reduce their holdings in recent years. JPMorgan Chase & Co., the second-largest mortgage lender, bought about $45 billion worth of mortgage servicing rights in 2015 from Ocwen Financial Corp.
Thursday’s sale represents all of Seneca’s mortgage-servicing book, and the firm will be wound down, according to two people with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly.
Seneca was formed by Blackstone’s GSO Capital Partners unit along with EJF Capital LLC and Arbor Commercial Mortgage LLC to take advantage of regulatory changes that were encouraging banks to sell servicing rights. Seneca said last year it planned to cut about one-sixth of its 267 employees in New York, according to notices filed with the state.
Eileen Lindblom, executive vice president at Seneca, didn’t immediately respond to a LinkedIn message, while attempts to reach Chief Executive Officer Steven Katz by phone were unsuccessful. A notice on Seneca’s website said it was no longer servicing mortgage loans.
Seneca owned about $50 billion of mortgage rights, comprised mostly of residential loans, according to a June 2016 statement announcing that Nationstar Mortgage Holdings Inc. had been selected by Seneca as a secondary servicer. Nationstar is controlled by Fortress Investment Group LLC.
Wells Fargo is the largest U.S. mortgage servicer, with a portfolio of about $1.5 trillion as of June 30, according to its statement.
— With assistance by Melissa Mittelman, and Claire Boston