Happy Wednesday, LOs!
Lenders have begun reporting their fourth quarter earnings. Wells Fargo and JPMorgan Chase were the first to publish their Q4 financial results last Friday and if the depositories' results are a reflection of what's to come, mortgage originations are starting to decline.
Both banks reported a drop in their gain-on-sale margins and a decline in origination volume, a consequence of rising interest rates rising and reduced refi volume.
Wells Fargo reported that it originated $48.1 billion worth of mortgages in the fourth quarter, a dip from $51.9 billion in the third quarter. Meanwhile, Chase originated $42 billion worth of mortgages, a slight increase from the third quarter. Notably, Chase's home lending division posted net revenue of $1.1 billion, down 26% – which was driven primarily due to lower production margins.
U.S. Bank, originated $25.2 billion of residential mortgages in Q4, an 11.2% decline from the prior quarter, according to its Wednesday earnings report. Mortgage banking revenue in the fourth quarter dropped 28.7% to $298 million, down from $468 million a year prior. In all, the bank generated $1.361 billion in mortgage banking revenue in 2021, down from $2.06 billion in 2020, a 34% drop. Mortgage applications also fell dramatically in the fourth quarter, the bank reported.
According to a report published last week by investment bank Keefe, Bruyette & Woods, despite an origination slump, overall bank earnings came in relatively strong.
"Mortgage banking results came in generally better than expected at several large banks," the report said.
Heavy-hitter nonbanks are expected to report their earnings in February and it will be interesting to see if they too will report lower originations.
Tell me LOs, what are you seeing on the front lines at your respective lenders? Has your origination volume slumped?
Email me anonymously at mvolkova@housingwire.com.
Maria Volkova
Mortgage Reporter, HousingWire
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