Mortgage earnings deteriorated at Wells Fargo & Co. While there was a modest quarter-over-quarter rise in home lending, current-quarter activity is likely down. Nonconforming assets grew.
Prior to income-tax expense, the San Francisco-based bank-holding company earned $6.9 billion during the three months that finished on Sept. 30 according to its third-quarter 2017 earnings report.
In addition to deteriorating from the $8.3 billion that was earned a year earlier, income was down compared to $8.1 billion during the prior three-month period.
Earnings from mortgage banking of $1.046 billion sank from $1.667 billion generated in the same-three months during 2016. Mortgage income dipped from $1.148 billion in the second quarter of this year.
Home-lending volume during the most-recent three-month period came to $59 billion. Business was up from $56 billion in the prior quarter. But mortgage production was well short of $70 billion closed in the same-three months last year. During all three quarters so far during 2017, mortgage originations totaled $159 billion.
Retail originations accounted for $26 billion of third-quarter 2017 activity, while correspondent acquisitions were responsible for $32 billion, and home-equity loan originations were just $1 billion.
Refinance share was 28 percent, widening from 25 percent in the second quarter.
Fourth-quarter 2017 originations are likely to decrease from the third quarter number based on new applications, which fell to $73 billion in the third quarter from $83 billion three months earlier. In addition, the applications pipeline shrank to $29 billion from $34 billion in the second quarter.
Wells Fargo Chief Executive Officer Tim Sloan said in the report that the company “continued to invest in customer-focused innovation and have begun the rollout of our online mortgage application.”
Residential loans serviced by Wells Fargo had an aggregate unpaid principal balance of $1.563 trillion as of Sept. 30, 2017. The balance grew from $1.532 trillion three months prior but declined from $1.578 trillion one year prior. Third-party servicing accounted for $1.223 trillion of the September 2017 balance, and owned loans made up $0.340 trillion made up the rest.
The ratio of mortgage-servicing rights to the balance on those loans was 0.87 percent.
The weighted-average note rate on Wells Fargo’s servicing portfolio was reported at 4.23 percent. Freddie Mac reported average 30-year fixed rates at 3.91 percent for the week ended Oct. 12 — exposing some of the bank’s servicing portfolio to rate-term refinances.
Residential assets on the balance sheet grew to $321.325 billion from $319.313 billion at the midpoint of this year. But Wells Fargo’s residential holdings have been reduced from $326.794 from the report a year ago.
First mortgages made up $280.173 billion of the latest total, up $3.6 billion from three months earlier. The report indicated that nonconforming growth of $7.5 billion was partially offset by the runoff of higher-yielding legacy portfolios.
Junior liens accounted for the other $41.152 billion of the residential total, down $1.6 billion from the preceding period and $7.0 billion from the same period last year as continued paydowns exceeded new originations.
Commercial real estate loan assets diminished, falling to $152.995 billion from $155.614 billion in the last quarter and $153.563 billion the same quarter in 2016.
Last month’s balance consisted of $128.475 billion in commercial mortgages and $24.520 in CRE construction loans.
The third quarter finished with 268,000 full-time equivalent employees on the payroll. Headcount was 270,600 people at the end of June and 268,800 as of the same date last year.
Wells Fargo operated 8,400 locations, a hundred fewer than as of mid-2017.
