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Morgan Stanley Mulls Over Getting Mortgage Business In-House

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Morgan Stanley (MS - Free Report) plans to start handling mortgage business in-house with its third-party provider PHH Corp , which is set to make an exit from the mortgage origination business next year.

According to a Reuters article, sources familiar with the matter stated that Morgan Stanley feels this move will lead to improved customer-service and increased originations.

The company would, however, be only managing the initial steps in mortgage lending. PHH Corp will continue to help Morgan Stanley with the later stages such as mortgage servicing.

Also, Morgan Stanley would be making necessary recruitments for back-office operations as well as underwriting required for performing origination functions.

The executives of Morgan Stanley are of the opinion that in-house handling of originations will result in a smoother process, lending an added advantage to approach wealthy clients with other products and services that the bank has to offer.

Apart from Morgan Stanley, some other banks are adopting steps to build on their mortgage business. Recently, Bank of America Corporation (BAC - Free Report) moved away from outsourcing mortgage originations to provide customers with better service. Also, Wells Fargo & Company (WFC - Free Report) had acquired mortgage servicing rights worth $51 billion from Seneca Mortgage Investment.

Lately, Morgan Stanley has been taking steps to improve overall performance. It has been restructuring its operations with a view to reduce balance-sheet risks and strengthen the product portfolio. Also, it launched a cost-savings program, remaining on track to achieve $1 billion expense savings by 2017.

Shares of Morgan Stanley have gained 10.3% year to date versus the industry’s decline of nearly 1%.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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