Wells Fargo’s Rising Originations Likely to Fall

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Quarterly home-loan production was higher at Wells Fargo & Co. but is likely to fall in the fourth quarter. The lender’s balance sheet grew as a result of retaining conforming loans for investment.

Residential originations during the three months ended Sept. 30 totaled $139 billion, according to third-quarter earnings data released Friday.

Business was propped up from $131 billion in the second quarter. Home-loan production surged from the same period last year, when $89 billion was originated.

So far this year, home-loan production totals $399 billion.

Third-quarter fundings included $61 billion in business generated by in-house loan originators and $77 billion in business from correspondent and wholesale clients.

Refinance share widened to 72 percent from 69 percent in the second quarter.

Fundings could be lower in the current quarter based on the unclosed pipeline, which fell to $97 billion from $102 billion as of June 30. New applications fell to $188 billion from $208 billion — also pointing to lower volume ahead.

Wells Fargo said it retained $9.8 billion in one-to-four-family conforming first mortgages on its balance sheet, “forgoing approximately $200 million of fee revenue that could have been generated had the loans been originated for sale during the quarter along with other agency conforming loan production.”

The residential mortgage servicing portfolio was $1.879 trillion as of Sept. 30, expanding from $1.863 trillion three months earlier and $1.814 trillion a year earlier.

Third-party servicing accounted for $1.508 trillion of the latest total, up from the second quarter’s $1.499 trillion. Wells Fargo serviced $1.457 billion for investors at the same point in 2011.

Wells Fargo owned $240.554 in residential first mortgages, growing from $230.263 billion at the end of the second quarter and $223.758 billion at the end of the same quarter last year. Junior lien holdings fell to $78.091 billion from $80.881 billion and were $88.264 billion as of Sept. 30, 2011.

The CRE loan servicing portfolio was $523 billion, not much different than the $525 billion total as of the end of the prior period and up from $519 billion at the end of the third quarter last year. The portfolio included $405 billion in commercial mortgages serviced for others.

Commercial real estate loans held for investment slipped to $104.611 billion from $105.666 billion three months earlier and $104.363 billion a year earlier. Commercial construction loans, however, inched up to $17.710 billion from $17.594 billion the prior quarter but fell from $19.719 billion as of the same point last year.

Implementation of new guidance from the Office of the Comptroller of the Currency prompted the San Francisco-based company to move $1 billion in performing first mortgages and $0.3 billion in performing junior liens from accrual to non-accrual status. Borrowers on these loans discharged their debts in bankruptcy and have not reaffirmed with Wells Fargo.

Repurchase liability closed out the third quarter at $2.033 billion, worsening from $1.764 billion at the end of the second quarter. Third-quarter additions to repurchase liability were $0.462 billion, while changes in estimates were a positive $387 million.

Mortgage banking income slipped to $2.807 billion from the second quarter’s $2.893 billion. The division earned $1.833 billion in the year-earlier period.

Company-wide earnings before taxes grew to $7.510 billion from $7.092 billion and was $6.140 billion in the third-quarter 2011.

Headcount across all business finished last month at 267,000, growing from 264,400 at the end of the prior quarter. A year prior, staffing stood at 263,800.


Mortgage Daily Staff


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