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Wells Earnings Climb as Mortgage Originations Drop

Quarterly earnings moved solidly higher at Wells Fargo & Co., though mortgage earnings and originations were down from a year ago. The servicing portfolio continued to be reduced.

In its third-quarter earnings report, the San Francisco-based bank-holding company disclosed $7.6 billion in income before income tax expense.

Earnings strengthened from $6.8 billion in the same three-month period during 2017. Results also improved from the preceding quarter, when income came in at $7.1 billion.

Mortgage banking income of $0.846 billion fell short of the $1.046 billion earned in the third-quarter 2017 but beat the $0.770 billion earned in the second quarter of this year.

Home-lending volume totaled $46 billion during the three months ended Sept. 30. Originations consisted of $18 billion in retail lending, $27 billion in correspondent acquisitions and $0.713 billion in home-equity loans and home-equity lines of credit.

Overall production retreated from $50 billion the prior quarter and tumbled from $59 billion during the same three months last year. For all nine months of 2018 that have elapsed, mortgage production came to $139 billion.

Junior lien mortgage originations rose 16 percent on a year-over-year basis.

“Nonconforming loan growth of $6.4 billion [linked quarter]; excludes $249 million of originations designated as held for sale in anticipation of the future issuance of RMBS securities,” the report stated.

Refinances represented 19 percent of originations, a thinner share than 22 percent in the second quarter.

Fourth-quarter volume is poised for a decline based on applications, which fell to $57 billion in the third quarter from $67 billion the prior period.

The financial institution serviced $1.521 trillion in loans secured by single-family properties. The servicing portfolio was reduced from $1.530 trillion as of June 30 and $1.563 trillion as of Sept. 30, 2017. Third-party servicing accounted for $1.184 trillion of the latest total.

The ratio of mortgage-servicing rights to related loans serviced for third parties was 1.02 percent, more than 0.98 percent in the second quarter.

Residential assets inched up to $319.603 billion from $319.543 billion but were off from $321.325 billion at the end of the third quarter of last year. Most recently, the total was comprised of $284.273 billion in first mortgages and $35.330 billion in junior liens.

Wells said it sold $1.7 billion in pick-a-pay purchased-credit-impaired loans.

The commercial real estate servicing portfolio grew to $650 billion from $642 billion and was just $608 billion at the same point last year. Wells serviced $529 billion of the portfolio for third parties.

CRE investments were trimmed to $144.093 billion from $146.901 billion and cut from $152.995 billion a year previous.
Making up the CRE portfolio were $120.403 billion in commercial mortgages and $23.690 billion in construction loans.

Headcount was cut to 261,700 from 264,500 three months earlier and 268,000 one year earlier.

Last month ended with 7,950 locations, dropping from 8,050 as of mid-year.

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