Aaaaaand They’re Off; BofA, Wells Jump Start Stress Tests

Ahead of bank stress test results, slated for release Friday, a mortgage lending race is on for the two major U.S. lenders, Wells Fargo & Co. (WFC) and Bank of America Corp. (BAC), which are locked in a competition for mortgage business. BofA’s purchase of Countrywide last year and Wells’ acquisition of Wachovia Corp. at year-end contributed to the competitors’ substantial gains in mortgage originations in recent months. Wells’ acquisition helped double the bank’s mortgage originations in the quarter, which pushed it head and shoulders above the competition. Quarterly earnings signaled Wells as the emerging winner of the mortgage origination race in Q109. Wells said it saw the best quarterly mortgage origination quarter since 2003, with $175bn in loan commitments, mortgage originations and mortgage securities purchases; $101bn of which were purchase or refinance mortgage loans for more than 450,000 homeowners. Wells also reported $190bn in mortgage applications lining the pipeline, including a record $83bn in applications in March alone. BofA funded $85bn in first mortgages and provided more than 382,000 borrowers with either purchase or refinance mortgages in the Q109. The bank made an estimated $16bn of these originations to 102,000 low- and moderate-income borrowers. BofA modified 119,000 home loans in the quarter, part of its commitment announced last year to modify more than $100bn in loans held by some 630,000 borrowers. Treasury Department lending reports among the 21 top TARP recipients signaled early results of the Wells/BofA mortgage race in past weeks. The Treasury reported in mid-April mortgage lending continued to grow since January, showing an increasing gap between the volume of purchase money mortgages and refinance volume as mortgage rates linger at historic lows and homeowners attempt to lower monthly payments. While both Wells and BofA showed strong growth in mortgage originations in February alone, Wells pulled far ahead of the competition. Wells posted $34.8bn in mortgage originations in February, up a whopping 45% from $24bn in January. Refis accounted for 82% of Wells’ mortgage business in February, from 70% in January, according to the Treasury’s report. Meanwhile, BofA funded $28.7bn in mortgage originations in February, up more than 25% from $22.8bn in January. Refinances accounted for almost 78% of BofA’s February mortgage originations, with new home purchases made up the remaining $6.4bn. The competing lenders also took the top positions in the commercial and multifamily origination market in 2008, according to a report released Tuesday by the Mortgage Bankers Association. BofA posted $37.69bn in commercial and multifamily origination volume, while Wells posted a close second with $37.57bn. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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