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Wells Fargo Boosts Mortgage Business, Buys MSRs Worth $51B

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Wells Fargo & Company (WFC - Free Report) recently acquired mortgage servicing rights (MSRs) worth $51 billion from Seneca Mortgage Investment. The financial terms of the deal were not disclosed.

The loans underlying the servicing rights have been guaranteed by Fannie Mae or Freddie Mac. Also, the MSRs will be included in Wells Fargo’s third-quarter results. The company also assured that the customers will receive detailed welcome information at the time of transfer.

As of Jun 30, 2017, Wells Fargo had a servicing portfolio of about $1.5 trillion, which made it the leading servicer of mortgage loans.

Franklin Codel, head of Wells Fargo’s consumer lending division, said that mortgage servicing is a core business for the bank and this transaction is seen as an opportunity to strategically grow its portfolio.

Though Wells Fargo is making efforts to uplift its reputation in the market, the unending litigations faced by it keep offsetting them.

On Sep 7, the federal appeals court ordered to reopen the whistleblower lawsuit filed by two former employees of Wells Fargo, who claimed to have been fired on attempting to report about their employers hiding mortgage improprieties and losses worth billions of dollars.

However, Wells Fargo had recently hit the news for facing a class-action lawsuit alleging the bank to have charged unjustified rate-lock extension fees to borrowers who were not liable to pay them. Also, consumer agencies across the United States have received complaints against the bank for having charged rate-lock extension fees wrongly to customers ranging from $1,000 to as high as $4,500.

Amid all the pessimism with regard to Wells Fargo, it shares have lost 9.9% over the past year versus the industry’s rally of 2%.

Currently, the stock carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space worth considering are The PNC Financial Services Group, Inc. (PNC - Free Report) , State Street Corporation (STT - Free Report) and FB Financial Corporation (FBK - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PNC Financial’s Zacks Consensus Estimate for current-year earnings was revised 1.8% upward for 2017, in the past 60 days. Also, its share price has increased more than 30% in the past 12 months.

State Street’s current-year earnings estimates were revised 3.7% upward, over the past 60 days. Further, the company’s shares have gained above 30% in a year.

FB Financial’s Zacks Consensus Estimate for current-year earnings was revised 2.7% upward, over the last 60 days. Moreover, in the past year, its shares have gained above 60%.

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