Wells Fargo reports lower origination volume in Q3

Wells Fargo reported revenue of $2.01 billion from home lending, down from $2.07 billion in Q2


Wells Fargo originated $51.9 billion worth of mortgages in the third quarter, down slightly from $53.2 billion in the previous quarter.

The depository’s retail business made up most of its origination volume from July to September, coming in at $32.5 billion, while the correspondent channel produced $16.7 billion worth of mortgages.

Despite earlier reports in the mortgage industry that refis were waning, Wells Fargo’s third quarter results revealed that 55% of their origination business was refi business, remaining unchanged from the previous quarter.

Furthermore, Wells Fargo reported revenue of $2.01 billion from home lending, down slightly from $2.07 billion in the second quarter, but down 20% year-over-year.

The depository noted in their earnings report that the decrease in revenue for home lending was a result of “lower mortgage banking income and lower net interest income primary driven by lower loan balances.”

“The decline in mortgage banking income was primarily due to lower gain on sale margins and lower originations, as well as a decline in servicing fees, partially offset by higher gains from the resecuritization of loans we purchased from mortgage-backed securities last year,” Wells Fargo said.

Meanwhile, third party mortgage servicing rights (MSRs) totaled $739.53 billion, marking a decline of $29.9 billion.  

Wells Fargo reported an overall net income of $5.1 billion, up from $3.2 billion last year and a total revenue of $18.83 billion.

Charlie Scharf, CEO of Wells Fargo, said in a statement that actions taken to improve operating effectiveness and financial returns are coming to fruition. In the third quarter, the bank saw net interest income stabilize and period-end loans grow for the first time since the first quarter of 2020.

“Expenses continued to decline as we made progress on our efficiency initiatives, and we increased our capital return to shareholders by repurchasing $5.3 billion of common stock and increasing our dividend,” Scharf said.

Scharf also addressed the recent expiration of the 2018 Consumer Financial Protection Bureau consent order, which the depository was slapped with after regulators discovered sales practices that encouraged employees to open millions of unauthorized bank accounts.

The depository’s CEO called it “an important milestone in our progress to correct our past practices” and also mentioned the recent Office of the Comptroller of the Currency enforcement action, which, he said is “a reminder that the significant deficiencies that existed when I arrived must remain our top priority.”

“We are a different company today and the operational and cultural changes we’ve made are enabling us to execute with significantly greater discipline than we have in the past,” he added. “ I believe we are making significant progress, and I remain confident in our ability to continue to close the remaining gaps over the next several years, though we may continue to have setbacks along the way.”

In contrast to Wells Fargo, JPMorgan Chase, the second-largest depository mortgage lender in the country, reported origination volume at $46.1 billion, an improvement from the second quarter. Mortgage fee and related income came in at $596 million, up from $548 million in the prior quarter.

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