It was a tale of two lenders in the first quarter of 2013, according to earnings reports released today by Wells Fargo and Chase.
After crunching the numbers, it appears the two are heading in different directions, though Chase is unlikely to dethrone Wells Fargo anytime soon.
Wells Fargo saw home lending volume dip to $109 billion in the first quarter, down from $125 billion in the fourth quarter and $129 billion a year earlier.
Along with that, the San Francisco-based bank and lender also experienced in decline in mortgage applications, which fell to $140 billion from $152 billion in the fourth quarter and $188 billion in the first quarter of 2012.
As a result, the company’s unclosed mortgage pipeline shrunk to $74 billion, down from $81 billion in the linked quarter and $79 billion a year ago.
Refis and Correspondent Lending Down
If you dig into the numbers, there are a couple of reasons why home loan production is off. For one, refinances as a percentage of total application fell to 65% in the first quarter.
They’re down from 72% in the fourth quarter and 76% a year ago. Long story short, there just aren’t as many potential refinance transactions left, as most predicted.
Most homeowners already refinanced, though there is the possibility for some homeowners to refinance again, seeing that mortgage rates have continued to trickle lower.
Still, refinance activity is expected to drop tremendously this year, and purchase-mortgage activity certainly won’t be able to make up for the entire decline.
Additionally, Wells Fargo saw a big drop in correspondent lending, which actually accounted for much of their quarterly and annual decline.
I’m assuming this isn’t by accident, and could be the result of the bank choosing to focus only on its highest quality business partners.
There’s also an industry-wide push to focus on retail relationships as well, which are valuable from a cross-selling (and loan quality) standpoint.
Chase Growing Larger in the Mortgage Space
While Wells was sputtering, number two was making up for lost time. Chase said it increased mortgage lending by 3% from the fourth quarter and 37% from a year ago.
Total mortgage origination volume for the NYC-based bank increased to $52.7 billion in the first quarter (260,000 mortgages), up from $51.2 billion at year-end and $38.4 billion in the first quarter of 2012.
Chase was also able to increase mortgage application volume slightly, though only by one percent from a year ago. It was off 8% from the fourth quarter.
Contrary to Wells, Chase increased its correspondent mortgage lending significantly from a year earlier.
In fact, it nearly doubled correspondent output (+69%) as the channel accounted for nearly half of overall production. Retail volume increased 12% from a year earlier, but was off one percent from the fourth quarter.
Chase seems to be making a bigger push in home loan lending, as evidenced by these numbers and a recent ad campaign.
The bank is running commercials nationwide promoting its “Chase My New Home” app, which allows potential customers to search and compare homes, calculate monthly mortgage payments, and connect with a Chase Mortgage Banker.
It appears to be their way of saying they want a bigger piece of the purchase market. However, it’s going to take a lot of work to steal the number one spot from Wells Fargo…