Wells Fargo Sells Most of Its Commercial Real Estate Servicing Business

The commercial real estate game in 2024 is a real fixer-upper, but America’s third-largest bank has found a partner looking for a new lease on life.

Wells Fargo said Tuesday that it will sell most of its commercial mortgage servicing business to Trimont, a global loan services provider, in a deal that will make the buyer the biggest servicer in the US commercial real estate industry.

Office Suite Deal

Wells Fargo and Trimont did not disclose the terms of the deal, but Trimont CEO Bill Sexton said his firm would take over servicing for roughly $475 billion worth of loans. That will triple Trimont’s loans under management to over $715 billion, and take it from the 10th-largest servicer in the US commercial real estate industry to the largest.

Loan servicing — the administrative aspects of loans like billing, collections, and remitting funds to the lender — has been handled by nonbanks. In the case of Wells Fargo, which said last year that it was refocusing its mortgage business on its customers instead of acquiring new ones, weaning off of commercial loans aligns with in-house strategy. More broadly, the steep decline in US commercial real estate since the pandemic has cut into the sector’s appeal:

• A survey by CoStar analyst Nigel Hughes, released earlier this month, found appraised values have fallen between 20% and 80% for properties in San Francisco with commercial mortgage-backed securities in default.
• Last month, The Wall Street Journal reported figures from data firm MSCI that said $20.5 billion worth of office buildings, apartments, and other commercial property were foreclosed or seized in the second quarter, up 13% from the first quarter and the most of any quarter since 2015.

End Result: Wells Fargo will maintain service for third-party agency and government-sponsored loans along with the commercial property loans on its balance sheet. Trimont, meanwhile, is betting that the “strategically important transaction” will catapult it to new prestige among real estate capital providers.