Despite improved annual production, quarterly originations took a downturn at Wells Fargo & Co. and appear headed lower.
Residential real estate originations amounted to $87 billion in last year's fourth quarter, falling 16 percent from the previous quarter and 23 percent below the comparable period in 2005, according to Wells' earnings release today.
For all of 2006, however, mortgage originations of $398 billion surpassed the previous year's total by $32 billion, the San Francisco-based banking behemoth reported.
Loans from the wholesale/correspondent channel accounted for $46 billion of the fourth quarter's fundings, retail originations represented $29 billion, and Wells Fargo Financial contributed $3 billion, according to the statement.
Home equity loans and lines accounted for the remaining $9 billion of the quarter's volume. While home equity volume edged down from the previous quarter, it was unchanged on annual basis at $39 billion, Wells reported.
Nonprime business, including HEL's and originations from Wells Fargo Financial, totaled $12 billion for the quarter and $49 billion for all of 2006, according to the data.
Retail mortgage originations and home equity lending were among the categories of financial services Wells cited it continued to lead nationally.
As of Dec. 31, 2006, the pipeline of mortgage applications was reportedly $48 billion, down from $55 billion at the end of the third quarter.
Wells said the servicing portfolio grew 36 percent over the year to end it at $1.385 trillion, with a customer base of 7.6 million and a weighted-average note rate of 5.92 percent. Meanwhile, the national home equity group portfolio of $79 billion reportedly grew 10 percent from yearend 2005.
"The past year has been a very challenging year for the mortgage industry with the flat to inverted yield curve and a slowdown in the housing sector," said Mark Oman, a home and consumer finance group vice president, in the announcement. "Despite this environment, we continued our long track record of growing our mortgage servicing businesses at double-digit rates, which provides opportunities to cross-sell and retain these customers.
"We remain very disciplined in residential real estate lending by ensuring that our product offering is appropriate for both our customers and the investors in our securities. We have not offered some of the higher-risk products, such as the payment option ARM."
Full-year home mortgage revenue declined from the previous year to $4.2 billion, virtually making it the only major business line that did not generate double-digit revenue growth.
Wells announced that record net income of $8.48 billion was up 11 percent from 2005's total.