Bank 2Q mortgage production up 7%, but financials slip

The bank earned $1.23 billion on mortgage originations and loan sales in the second quarter, down from $1.38 billion in the first quarter but up from $922 million one year prior.

Compared with the second quarter 2020, “mortgage origination and sales revenue increased primarily due to higher gains from the re-securitization of loans we purchased from mortgage-backed securities last year and higher origination volume in our retail channel,” Wells Fargo’s earnings release said. “These increases were partially offset by lower gains on loan portfolio sales, lower correspondent origination volume, and lower net interest income primarily driven by lower loan balances.”

Origination volume totaled $53.2 billion, up from $51.8 billion in the first quarter, but lower than the $59.2 billion produced in the second quarter of 2020.

Retail production was $36.9 billion, which was an increase from the first quarter’s $33.6 billion and $30.5 billion a year ago. But correspondent purchases over the same time frame fell to $16.3 billion from $18.2 billion and $28.7 billion respectively.

Still, Wells Fargo reported a 13% quarter-to-quarter drop in gain on sale, compared with 32% at JPMorgan Chase. “However, we note that Wells Fargo’s accounting (gain on sale recognized at close versus rate-lock like most lenders) means its trends may not yet fully reflect the sequential decline in profitability that we expect from other mortgage banking businesses this quarter,” said KBW’s George.

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