Home-loan originations at Ally Financial Inc. sank by nearly half from the final quarter of last year. But earnings were a different story. Both originations and earnings were impacted by a retreat from correspondent lending.
The Detroit-based company said in its earnings report that it originated $8.6 billion in residential loans during the first quarter.
Business plunged from $16.5 billion funded during the final three months of last year. It was also worse than the first-quarter 2011, when fundings totaled $11.8 billion.
The significant decline reflects Ally’s decision last year “to reduce its focus on the correspondent mortgage channel.” In its 2011 10-KÂ filing with the Securities and Exchange Commission, Ally said that correspondent production accounted for $45.349 billion of its total originations last year of $56.258 billion, while mortgage brokers generated just $3.495 billion and direct lending amounted to $7.414 billion.
The most-recent period included $6.6 billion in conforming loans, $0.5 billion in jumbo mortgages and $1.5 billion in government business.
Ally’s primary mortgage servicing portfolio fell to $338 billion from $351 billion at the end of last year and $353 billion as of March 31, 2011. The fourth-quarter SEC filing indicated that the international portion of the servicing portfolio was $5.773 billion as of Dec. 31, 2011, putting the domestic portion of the March 31 servicing portfolio at around $332 billion, lower than $355.68 billion as of Dec. 31.
There has been no change for the past three quarters in Ally’s mortgage investment portfolio, which finished last month at $9.3 billion. A year prior, the portfolio stood at $9.5 billion. Prime jumbo mortgages accounted for 31 percent of last month’s total, while second liens represented 13 percent. The low-no-doc share was 16 percent, and investor properties made up 4 percent.
Also unchanged for the last three quarters was residential delinquency of at least 30 days, which was 3.3 percent. Delinquency did improve, however, from 3.5 percent as of the first-quarter last year.
Repurchase loss experience fell to $38 million from the fourth quarter’s $51 million but was up from $32 million in the same period last year. Total claims outstanding grew to $1.195 billion from $1.069 billion at the end of last year and $0.838 billion as of March 31, 2011.
Earnings from mortgage operations swung to a $191 million profit from a $258 million fourth-quarter loss. Mortgage income was also better than the $43 million earned in the first-quarter 2011.
The automotive lending giant earned $474 million across all businesses before taxes, a big improvement from the $20 million earned in the final three months of 2011. Earnings also improved from the first-quarter of last year’s $425 million.
While the improvement was mostly driven by its global automotive services, Ally said that results were also impacted by more favorable activity with mortgage servicing rights and its decision to move the mortgage origination focus from correspondent to retail lending.
“Our objective with respect to the mortgage business is unchanged,” Ally Chief Executive Officer Michael Carpenter explained in the report. “We continue to have a keen focus on taking steps to reduce risk in that business, while protecting the remaining Ally franchises and enabling them to thrive.”
Recent news reports suggest that Ally is on the verge of throwing Residential Capital LLC into bankruptcy.
While no data was reported for headcount as of last month, the SEC filing indicated that Ally finished 2011 with 14,800 employees, more than the 14,400 people on staff at the end of 2010.
