Wells Fargo Sees Mortgage Originations Plummet in Latest Quarter

The nation's largest mortgage originator, Wells Fargo (NYSE: WFC  ) , reported on Friday that its underwriting volume fell by 29% last quarter as a result of higher interest rates.

"We're in a transitional period in our mortgage business," Chief Financial Officer Timothy Sloan said during a conference call with analysts. "With the increase in mortgage rates, our mortgage origination volume declined [last] quarter, particularly refinance activity."

Prior to the third quarter, Wells Fargo had achieved seven consecutive quarters in which it underwrote more than $100 billion worth of mortgages. That was more than twice the quarterly volume of the runner-up, JPMorgan Chase (NYSE: JPM  ) , and well in excess of three times the amount reported by Bank of America (NYSE: BAC  ) , which was once the leader in the market.

As Sloan indicated, the culprit was higher interest rates. Since the beginning of May, rates on a 30-year fixed rate mortgage have risen from below 3.5% to roughly 4.5% -- though they recently settled around 4.2% after the Federal Reserve said it would wait before starting to taper its support for the economy.

The trend in rates has had the biggest impact on people looking to refinance existing mortgages. Across the country, refinance applications are down by approximately 60% since the first week of May. At Wells Fargo, the percent of mortgage applications that relate to refinancing has dropped from 72% of all applications in the third quarter of last year all the way down to 36% today.

The good news is that there doesn't appear to be any significant impact on the housing market. At JPMorgan, which also reported earnings on Friday, purchase-money mortgages were up by 57% on a year-over-year basis. And comments from Wells Fargo CEO John Stumpf underscore the industry's optimism (emphasis added):

While the recovery remains uneven, there are many positive signs, including increased small business optimism and a dramatic improvement in household net worth, with household leverage now lower than any time since 2002, which provides capacity for consumer spending and borrowing going forward. The housing market also continues to demonstrate strong momentum. While, as expected, higher rates reduced mortgage refinancing activity this quarter, home price appreciation remains strong and affordability remains excellent.

Is it time to buy big bank stocks?
Have you missed out on the massive gains in bank stocks over the past few years? There's good news: It's not too late. Bargains of a lifetime are still available, but you need to know where to look. The Motley Fool's new report "Finding the Next Bank Stock Home Run" will show you how and where to find these deals. It's completely free -- click here to get started.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2681218, ~/Articles/ArticleHandler.aspx, 10/1/2014 10:59:29 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 hour ago Sponsored by:
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASD 4,422.09 -71.31 -1.59%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/1/2014 4:03 PM
BAC $16.82 Down -0.23 -1.35%
Bank of America CAPS Rating: ****
JPM $59.77 Down -0.47 -0.78%
JPMorgan Chase & C… CAPS Rating: ****
WFC $51.26 Down -0.61 -1.18%
Wells Fargo CAPS Rating: ****

Advertisement