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Wells Fargo’s Home Lending Jumps, Headed Higher

Mortgage News

Quarterly residential loan originations accelerated at Wells Fargo & Co. and are likely headed even higher despite industry forecasts to the contrary.

The San Francisco-based bank-holding company revealed in its second-quarter 2017 earnings report $8.1 billion in income before income tax expense.

Earnings were stronger than $7.6 billion during the preceding
three-month period
. In the same three months last year, Wells Fargo earned $8.2 billion.

Mortgage banking income dipped to $1.1 billion from $1.2 billion in the first quarter and fell from $1.4 billion in the second-quarter 2016. The most-recent total consisted of $0.7 billion in “net gains on mortgage loan origination/sales activities” and $0.4 billion in servicing income.

“The production margin on residential held-for-sale mortgage loan originations was 1.24 percent, down from 1.68 percent in the first quarter due to increased price competition and a higher percentage of correspondent volume, which has lower production margins than retail originations,”
the report stated. “Mortgage servicing income was $400 million in the second quarter, down from $456 million in the first quarter, primarily due to lower net hedge results and higher prepayments.”

There were $56 billion in single-family loan originations during the three months ended June 30, 2017. Business improved from $44 billion in the first-quarter 2017. But production slowed from $63 billion in the second-quarter 2016.

Total originations during the entire first half of this year were $100 billion.

The most-recent three-month period included $25 billion in retail originations and $31 billion in correspondent acquisitions.

Refinance share was cut to a quarter from 39 percent in the first quarter.

Wells Fargo originated $14 billion of the latest quarter’s activity for its own investments, more than $10 billion in the first-three months of this year.

Third-quarter 2017 home lending is likely to surge based on new applications, which soared to $83 billion in the second-quarter 2017 from just $59 billion in the previous period. Also supporting an improving outlook is the application pipeline, which climbed to $34 billion from $28 billion.

The probable increase contrasts average economic forecasts from Fannie Mae, Freddie Mac and the Mortgage Bankers Association — which have originations falling 7 percent between the second and third quarters.

As of the end of last month, the total residential loan servicing portfolio was $1.532 trillion, less than $1.539 trillion three months earlier and $1.599 trillion one year earlier.
Third-party servicing represented $1.189 trillion of the June 30, 2017, total.

Another $0.004 trillion in home loans was subserviced for others.

Residential assets on the balance sheet grew to $319.313 billion from $318.966 billion as of March 31, 2017, but were trimmed from $326.934 billion as of mid-2016. The latest total was comprised of $276.566 billion in first mortgages and $42.747 billion in junior liens.

Commercial mortgage servicing was trimmed to $0.605 trillion from $0.606 trillion the prior quarter and a year prior. Most recently, the portfolio included $0.475 trillion in mortgages serviced for others.

The commercial mortgage subservicing portfolio was $0.008 trillion as of the middle of this year.

The bank’s investment portfolio included $155.614 billion in commercial real estate loans. CRE assets dipped from $156.596 billion three months earlier and $151.707 billion one year earlier. The June 30, 2017, CRE holdings consisted of $130.277 billion in commercial mortgages and $25.337 billion in CRE construction loans.

Across the entire organization, there were 270,600 full-time equivalent employees.
Headcount slipped from 272,800 three months prior and 267,900 twelve months prior.

Wells Fargo did business from 8,500 locations as of the conclusion of the most-recent period, the same as of the end of the first quarter.

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