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Lending

5 charts show how Wells Fargo plans to grow its mortgage business

Biggest mortgage lender going against the tide

Wells Fargo
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While other banks have been shedding – voluntarily or involuntarily – their mortgage business, Wells Fargo (WFC) plans to grow it, according to the bank’s investor day presentation.

Wells Fargo is the nation’s largest mortgage lender and servicer – handling 18.9% of all mortgage originations in 2013, and servicing 18.5%.

Wells Fargo executives at the investor day presentation said that Wells Fargo expects loan growth to continue at a faster pace than the overall economy, and that Wells Fargo is well-positioned for rising rates. They said that mortgage production revenue will stabilize in 2014.

From a high point of about $139 billion in September 2012, Wells Fargo saw an almost steady decline, posting just $36 billion in activity in March 2013.

Rising affordability gap, investor-driven price increases, and the much tighter lending standards imposed on the industry have hurt mortgage originations, and Wells like most of the other banks saw a serious drop in mortgage activity in 2013.

Mortgage income accounted for just 15% of the bank’s non-interest income, but that will change in 2014, the bank’s analysts said.

Oddly, the strength of Wells Fargo -- having so much invested in mortgage business -- is actually limiting its exposure to investment banking. But it does help the mortgage business side.

The company, though, thinks it’s well positioned to take advantage of what it foresees as a stabilizing housing market, and a large existing customer base that can be tapped.


Wells Fargo also wants to grow its non-conforming loans and increase returns from servicing.

What’s the strategy? Go local, local, local.

Not only does Wells Fargo expect to take advantages of its existing potential customers, it also wants to increase the share of purchase originations compared to refinancings.

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