Commercial Federal to Sell $10 billion Mortgage Servicing Business to Wells Fargo

OMAHA, NE – Commercial Federal Corporation today announced it has executed a definitive agreement to sell its $10 billion national third party mortgage servicing portfolio and correspondent mortgage origination network to Wells Fargo Bank, N.A., a subsidiary of Wells Fargo and Company. Commercial Federal will continue to offer a full line of mortgage loan products and services to consumers in its seven-state market area of Nebraska, Colorado, Iowa, Missouri, Kansas, Oklahoma and Arizona.

“The strategic decision to exit third party mortgage servicing will further focus Commercial Federal’s business model on growing our very successful core banking franchise,” said William A. Fitzgerald, chairman and chief executive officer.

Fitzgerald added that Commercial Federal will continue to offer mortgage loans and related services “as an important part of the products and services we have provided, and always will continue to provide to our valued customers.”

The Company estimates a total after-tax charge to earnings approximating $65 million in the first quarter. This charge is associated with prepayment of Federal Home Loan Bank borrowings, selling investment securities, eliminating interest rate hedges, recording certain exit costs tied to the business, and is inclusive of the first quarter valuation adjustment for mortgage servicing rights.

Commercial Federal estimates that approximately 135 positions will be affected by the sale, and the Company said it is taking a number of actions to minimize the impact of job loss.

“The size of our mortgage servicing for others portfolio created too much variability in our earnings and that detracted from the performance of the rest of the bank,” said Fred Kulikowski, CFB president and chief operating officer. “Focusing our attention on retail and commercial banking – the core businesses that will drive the most profitable long-term growth for us – will enhance long-term value for our shareholders by improving margins, and therefore profitability.”

These transactions will not affect the Bank’s regulatory well capitalized status.

“Although these actions will result in a loss for the first quarter, it is the right decision for our shareholders. Focusing the Company on our core retail and commercial banking franchise will yield the strongest and most stable earnings growth for us going forward,” concluded Mr. Fitzgerald.

“We look forward to this opportunity to satisfy the mortgage needs of these customers, both retail and wholesale, who’ll come to us through this acquisition,” said Cara Heiden, Division President – National Consumer and Institutional Lending for Wells Fargo Home Mortgage.