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Wells Sees Mortgage Earnings Rise, Marks Up MSRs, Keeps GSE Loans

January 11, 2013

INSIDE TAKE:

Wells Sees Mortgage Earnings Rise, Marks Up MSRs, Keeps GSE Loans

By Paul Muolo / pmuolo@imfpubs.com

Wells Fargo & Co., posted another stellar quarter of mortgage earnings, booking $3.1 billion of noninterest income in its residential finance division, and foregoing $340 million of fee revenue by opting to keep certain loans on its books as opposed to selling them into the secondary market.

Compared to 3Q, mortgage banking profits (excluding interest income) rose 9 percent.

According to an analysis of its earnings statement by Inside Mortgage Finance, the megabank also marked up the asset value of its mortgage servicing rights to $11.54 billion at the end of 4Q compared to $10.96 billion in 3Q. A year ago it valued its MSRs at $12.6 billion.

However, Wells saw residential fundings fall 10 percent to $125 billion in the fourth quarter.

Wells, not surprisingly, ranked first among Fannie Mae/Freddie Mac sellers, according to brand new exclusive numbers compiled by IMF.

 

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What is it going to take to convince lenders to loosen the credit box (i.e., remove underwriting overlays)?

The recent rep and warranty changes announced by the Federal Housing Finance Agency should go a long way in protecting lenders from future buybacks and help expand mortgage credit.
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There shouldn’t be any expansion of the mortgage credit box since looser underwriting is what caused the recent mortgage crisis.

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