Performance Weakens at U.S. Bank

Mortgage News

Mortgage Daily Staff

                                                 October 17, 2012

U.S. Bancorp is the only major mortgage lender so far to report a decline in quarterly home-loan originations. Early-stage delinquencies, meanwhile, deteriorated. But the company did manage to grow its servicing portfolio and mortgage holdings.

Residential loan production came in at $21.529 billion during the third quarter, earnings data released Wednesday indicated.

Mortgage closings were lower than the record $21.667 billion funded during the three months ended June 30. The decline in loan production contrasts activity at Citigroup Inc., JPMorgan Chase & Co., The PNC Financial Services Group Inc. and Wells Fargo & Co. — each of which reported an increase from second-quarter activity.

But U.S. Bancorp’s originations nearly doubled from a year earlier, when volume was $11.509 billion.

So far during 2012, residential production totals $62.364 billion.

Another $0.005 billion in subprime mortgages were originated by the consumer finance division, increasing from $0.003 billion in second-quarter production but no different than the third-quarter 2011.

The third-party mortgage servicing portfolio finished last month at $211.263 billion, growing from $207.427 billion at the end of June. At the same point last year, $185.555 billion in mortgages were being serviced.

The investment portfolio included $41.902 billion in residential mortgages. Home-loan assets grew from $39.920 billion at the end of the previous quarter and $35.124 billion as of Sept. 30, 2011. Last month’s total reflected $31.504 billion in residential loans and $10.398 billion in first-mortgage home-equity loans.

Residential delinquency of at least 30 days, including non-performing loans, was 3.46 percent as of Sept. 30, worsening from 3.31 percent as of June 30 and 3.97 percent at the same point in 2011. The rise was attributed “primarily due to a regulatory clarification in the treatment of loans to borrowers who have exited bankruptcy but continue to make payments on their loans.”

Reflected in the delinquency figure was a 30- to-89-day rate of 0.93 percent, higher than 0.86 percent in the prior period, and an 0.72 percent 90-day rate excluding non-performing loans, down from 0.80 percent.

Second lien and HEL holdings were trimmed to $17.119 billion from the prior quarter’s $17.476 billion and the year-earlier period’s $18.410 billion.

HEL delinquency deteriorated — climbing to 2.18 percent from 1.92 percent three months prior and 1.69 percent one year prior. Excluding non-performing loans, the 30-to-89-day rate climbed to 0.81 percent from 0.71 percent, and the 90-day rate inched up to 0.32 percent from 0.30 percent.

Commercial real estate loans on the balance sheet inched up to $36.813 billion from $36.557 billion and were $35.603 billion 12 months prior. CRE assets included $30.831 in commercial mortgages and $5.982 billion in construction-and-development loans.

Delinquency on commercial mortgages fell to 1.92 percent from 2.16 percent three months earlier and 3.95 percent a year earlier.

As was the case with its peers, the company was required by the Office of the Comptroller of the Currency to reclassify performing consumer loans to bankrupt borrowers who have not reaffirmed their debt. The adjustment resulted in a $54 million credit loss provision.

After making $58 million in repurchases and make-whole payments, taking $32 million in realized losses and increasing reserves by $35 million, the mortgage representation and warranties reserve climbed to $220 million from $216 million in the second quarter.

Prior to income taxes, the Minneapolis-based company earned $2.1 billion, a little better than the $2.0 billion earned in the prior period and more than the $1.8 billion in earnings during the same period last year. After taxes, net income attributable to U.S. Bancorp was a record $1.5 billion.

U.S. Bank, N.A., operated 3,086 branches as of Sept. 30, six more than were opened as of June 30.

Mortgage Daily Staff

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