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Wells Positioned for Record Production

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Mortgage production more than doubled from a year ago at Wells Fargo & Co., though the quarter-over-quarter increase wasn’t so spectacular. But the ending mortgage pipeline has the nation’s biggest residential lender poised to establish an all-time record in the third quarter. Meanwhile, thousands of mortgage jobs were added in the latest quarter.

Home-loan originations were $131 billion, according to second-quarter earnings data released Friday.

Business grew from $129 billion in the prior quarter and soared from $64 billion in the same period last year.

Second-quarter retail production was $62 billion, while third-party originations were $68 billion.

Home Affordable Refinance Program transactions accounted for 16 percent of second-quarter business, similar to the first-quarter share.

New first mortgage loan applications grew to $208 billion from $188 billion three months earlier. Refinances accounted for 69 percent of second-quarter applications, retreating from 76 percent in the first quarter.

The first mortgage pipeline finished June at $102 billion — the second-highest in the company’s history and up 29 percent from the end of March.

Second-quarter production came in at around 166 percent of the March 31 pipeline of $79 billion. If the momentum continues, then third-quarter originations could reach around $169 billion — trumping the $161 billion record established in the third-quarter 2003.

The banking firm’s managed residential servicing portfolio was $1.863 trillion, expanding from $1.840 trillion as of March 31 and $1.810 trillion as of June 30, 2011. The serviced-for-others portion of the latest total was $1.499 trillion.

The residential first mortgage investment portfolio was $230.263 billion, slightly higher than $228.885 billion at the end of the first quarter.

The rate of delinquency, including foreclosures, was 7.14 percent, “seasonally higher than the first quarter” but lower than 7.44 percent a year earlier.

Delinquency on the servicing portfolio was more than 400 basis points lower than the industry average excluding Wells Fargo’s rate, according to an earnings conference call.

Home-equity loans on the balance sheet were reduced to $95.753 billion from $98.009 billion in the first quarter.

HEL delinquency of at least 60 days improved to 3.93 percent from 3.99 percent as of March 31.

The June 30 total investment portfolio included $103.1 billion in non-strategic liquidating loan portfolio, reduced from $108.2 billion as of March 31.

The commercial mortgage servicing portfolio finished June at $2.388 trillion, up from $2.366 trillion at the end of March and $2.327 trillion one year prior. Wells said $0.406 trillion of the commercial real estate portfolio was serviced for investors.

Unresolved repurchase demands and mortgage insurance rescissions fell to $1.67 billion from $1.86 billion at the end of March. The total was $2.24 billion a year earlier. The latest total reflected $1.27 billion in GSE demands, $0.213 billion in non-agency demands and $0.19 billion in mortgage insurance rescissions.

Wells said it set aside $669 million for mortgage repurchase losses, worse than the $430 million set aside in the first quarter. The increase was made as a result of discussions with government-sponsored enterprises and primarily includes loans sold between 2006 and 2008.

The mortgage banking business earned $2.9 billion in non-interest income, up marginally from $2.9 billion the previous period and much better than $1.6 billion in the second-quarter 2011.

Second-quarter income before taxes across all of Wells Fargo & Co. climbed to $7.1 billion from $6.6 billion three months earlier. Income came in at $6.1 billion in the second quarter of last year.

More than 2,000 full-time employees were added during the second quarter to accommodate higher volume. Mortgage staffing has increased 19 percent over the past year.

Company-wide headcount finished last month at 264,400. Staffing stood at 264,900 team members as of the end of March and 266,600 a year prior.

Branch count finished the latest period at more than 9,000 stores, the same as previously reported.

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