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Production, Pipeline and People Increase at Wells

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Home-loan volume, applications in the pipeline and the number of employees all increased at Wells Fargo & Co. Also higher were the residential servicing portfolio and commercial mortgage fundings.

Residential originations rose to $81 billion during the second quarter from $76 billion three months earlier, earnings data reported today indicated. Production was $129 billion a year earlier.

First-mortgage fundings accounted for $80.1 billion of the latest activity, improving from the first quarter’s $74.7 billion. Home-equity fundings improved to $1.4 billion from $1.1 billion.

Retail originations represented $44 billion of second-quarter business, and correspondent volume was $36 billion.

An indication of upcoming activity, the mortgage application pipeline, closed out June at $68 billion, 15 percent higher than the previous quarter. Mortgage applications received were $143 billion during the second quarter, rising from $125 billion. The refinance share of applications eased to 58 percent from 61 percent — suggesting purchase-money activity accounted for the increase.

Commercial real estate originations and commitments rose to $13.9 billion from $10.2 billion in the first quarter of this year.

The residential servicing portfolio was $1.812 trillion at the end of the second quarter, increasing from $1.798 trillion at March’s end and $1.783 trillion 12 months previous. Last month’s total reflected $1.437 trillion in loans serviced for others, $0.365 trillion in owned loans and $0.010 trillion in sub-servicing.

One- to four-family first mortgages owned by the company declined to $233.8 billion on June 30 from $240.5 billion on March 31 and $237.3 billion on June 30, 2009. The junior-lien portfolio, meanwhile, fell to $101.3 billion from $103.8 billion and $107.0 billion a year prior.

The San Francisco-based company’s commercial mortgage servicing portfolio closed out June at $0.551 trillion, lower than $0.564 trillion at the close of the first quarter and $0.584 trillion on June 30, 2009. The latest figure included $0.441 trillion in loans serviced for others, $0.100 trillion in owned-loans serviced and $0.010 trillion in subservicing.

The commercial real estate portfolio finished last month at $99.6 billion, growing from $97.8 billion at the end of March and $95.6 billion a year ago. The real estate construction portfolio declined to $30.9 billion from $34.5 billion and $41.3 billion a year earlier.

A chart in the report indicated that after declining in the first quarter, prime mortgage delinquency of at least 30 days was mostly unchanged. Late payments on pick-a-payment loans have been mostly flat since peaking earlier this year.

But home-equity delinquency of at least 60 days improved for the second consecutive period, ending last month at 3.11 percent compared to 3.21 percent at the end of March.

“Quarterly credit losses declined 16 percent to $4.49 billion in the second quarter from $5.33 billion in the first quarter,” Chief Credit and Risk Officer Mike Loughlin said in the report. “This improvement in losses was significant and broad-based across the consumer portfolios, with reduced losses in the home equity, Wells Fargo Financial, pick-a-pay, consumer lines and loans, auto dealer services and credit card portfolios.”

Mortgage banking income fell to $2.0 billion from the first quarter’s $2.5 billion and the second-quarter 2009’s $3.0 billion. Included in mortgage banking earnings was $1.2 billion in servicing income, less than $1.4 billion the prior quarter and $0.8 billion the prior year.

“Second quarter origination revenue was reduced by a $382 million addition to the mortgage loan repurchase reserve compared with a $402 million addition in first quarter,” the report stated.

After-tax net income at Wells Fargo & Co. climbed to $3.1 billion from the first quarter’s $2.6 billion. Earnings were mostly unchanged from $3.2 billion a year ago. Impacting the latest figure was an $0.5 billion release of loan-loss reserves and $0.1 billion in severance costs for Wells Fargo Financial, which disclosed earlier this month plans to wind down.

Company-wide headcount was 267,600 as of June 30, slightly more than 267,400 on March 31.

Moody’s Investors Service reported today that Wells Fargo Home Equity Group’s servicing operation had 1,993 full-time employees as of April 30.

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