At $20.7 billion, non-agency pass-through MBS accounted for just 1.4 percent of total bank and thrift MBS investments.

Large parts of the Bay Area and Southern California qualify for the top high-cost limit, while other California markets such as San Diego ($546,250) and Sacramento ($474,950) have intermediate high-cost limits.

The GSEs continued to see solid increases in purchase-mortgage business, which increased by almost 7 percent from July to August. It was the fifth straight monthly gain for the two.

Purchase-money lending increased by a hefty 37 percent, climbing to an estimated $163 billion in the second quarter, according to figures compiled by Inside Mortgage Finance.

Mortgage income reported in bank call reports includes earnings from production, loan sales and net servicing results, so industry profits are not tied exclusively to new lending.

It appears that mortgage bankers are beginning to liberalize, somewhat, the credit scores they're willing to accept on FHA loans.

It was the biggest volume of new lending above the conforming loan limit since the second quarter of 2007 – before “emergency” conforming loan limits were authorized by Congress.

On a combined basis, the nine lender/servicers tracked by Inside Mortgage Trends generated $243 billion in single-family mortgages during the second quarter, a little less than half the entire market.

S&P has been the top non-agency MBS rating agency over the years but DBRS captured the title in 2012 with 55 percent of rated transactions, according to Inside MBS & ABS.

Combined with the 15 companies that previously reported earnings, mortgage banking income jumped 10 percent in the second quarter, to $7.51 billion.