Mortgage Originations Just Fell by 66% at the Nation's Four Biggest Banks

If there wasn't enough reason to be worried about the housing market already, mortgage originations at the nation's four biggest banks fell by 66% in the three months ended March 31.

Apr 19, 2014 at 1:06PM


The mortgage market is hemorrhaging. In the three months ended March 31, originations at the nation's four biggest banks fell by a combined 66% compared with the year-ago period. It was the worst cumulative performance in over a decade.

While all four banks fared poorly, Citigroup (NYSE:C) took the biggest hit in terms of relative volume. Its quarterly production came in at $5.2 billion, or half that of the next largest originator, Bank of America (NYSE:BAC), which underwrote $10.8 billion in mortgages during the quarter. The figures at the two banks were down by 71% and 55%, respectively, on a year-over-year basis.


The obvious explanation for the drop concerns mortgage rates -- which, mind you, are still ridiculously cheap. Since the Federal Reserve said it would begin tapering its monthly purchases of mortgage-backed securities, the average rate on a 30-year fixed rate mortgage has gone from under 3.4% at the end of 2012 to 4.3% today. 

The move has markedly increased the cost to purchase a home and largely closed off any interest in refinancing. Had you gotten a $200,000 mortgage a year and a half ago, the monthly payment would have been in the neighborhood of $880 (excluding taxes and insurance). Today, it's nearly $1,000, equating to an increase of 13%. 

But while the impact of rates can't be denied, there's more to the story than this. JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon addressed the issue at length in his latest letter to shareholders:

There has been a large increase in the capital required to service and hold mortgages. Servicing itself has become far more costly and dangerous to the servicer -- servicing costs alone have gone up 20 basis points. We still have been unable to reform the government-sponsored enterprises or to get the securitization markets healthy again. This has real costs to consumers, especially for lower credit-quality consumers and particularly for government-guaranteed mortgages, which have become more expensive, more time intensive, and less available for consumers.

The problems, in other words, are multifaceted and seemingly not susceptible to a simple solution. 

What does this mean for the spring home selling season? At present, the statistics don't look good, as both new and existing home sales are anemic, to put it mildly. Even more concerning are pending home sales, a critical metric at this time of year, which recently dropped to the lowest level since October 2011. 

Could things turn around? Absolutely. But for the time being I certainly wouldn't bet on it.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. To learn about about this company, click here to access our new special free report.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Bank of America and owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers