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Quarterly mortgage originations down one-third at big four banks

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The big four banks originated a combined $186 billion in mortgages during the first quarter, down 33% from the $281 billion home loans written in the previous quarter, according to their financial statements. Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM) and Citigroup (C) each reported billions in earnings for the quarter. Their collective mortgage departments, however, did not fare as well. Servicing costs were up, each bank still has hundreds of millions of dollars in reserves for buybacks on defaulted loans, and originations fell so low that thousands of jobs were shed. The big four collectively originate and service roughly 65% of the nation's mortgages. A dip in their rate of business may be indicative of major declines in the housing market overall, and not necessarily due to giving up marketplace dominance. Wells wrote $84 billion in new mortgages for the quarter, down from $128 billion in the previous quarter. BofA originated $52 billion in new home loans, down from $81.2 billion. JPMorgan Chase totaled $36.2 billion in new mortgages in the first quarter, down from $50.8 billion. And Citi saw its originations totals drop to $14.1 billion from $21.8 billion in the fourth quarter. Real estate is seasonal, and three of the big four saw gains in origination volume from the same quarter a year earlier. Only BofA saw new loans slip from $66.9 billion originated in the first quarter of 2010. But those numbers were skewed from the homebuyer tax credit, which expired in April 2010. As volume slipped since, at least two of these banks announced layoffs in the mortgage department. BofA and Wells cut a combined 6,000 jobs. BofA laid off 1,500 and Wells shed 4,500. Some employees, at least at BofA, went to a new department where they work to clean-up delinquent loans and sort through buyback claims. Since the financial collapse, the entire mortgage industry has cut its work force in half. While the rest of the economy seems to be recovering – the unemployment rate dropped to 8.8% in March – housing continues to lag behind. More problems remain ahead. Some analysts believe new rule proposals from regulators such as risk retention and determining a borrower's ability to repay on a mortgage, could slow these operations even further. Even the banks expressed frustration when trying to handle the weight these once profitable machines have on their business. "Residential mortgage origination is one of the largest variable cost businesses at Wells Fargo," the bank said in its financial supplement. Write to Jon Prior. Follow him on Twitter @JonAPrior.

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