With rising mortgage rates, fewer people are refinancing their mortgages, which means big banks are seeing a dip in mortgage lending.
Wells Fargo funded $50 billion in residential mortgages during the fourth quarter, a 60 percent drop from $125 billion a year earlier. Wells Fargo, the largest mortgage lender in the country, is also losing some of its market share. It controls about 19 percent of the U.S. mortgage market, which is a decrease from 30 percent a year ago, according to Mortgage Finance. The last time the bank issued such few home loans was during 2008 in the midst of the financial crisis.
Still, No. 2 J.P. Morgan did about half of Wells Fargo’s business, funding $23.3 billion in mortgage loans in the fourth quarter, a 54 percent drop from a year earlier. That is also the bank’s lowest amount in originations since before the financial crisis.
“This is something we expected,” says Tim Sloan, Wells Fargo’s chief financial officer. “Originating $50 billion of mortgages in a quarter is a good feat. It just happens to be a little less than it was in the prior quarter.”
Wells Fargo says that about two-thirds of its loan volume was coming from refinancing and now two-third of its business is being driven by applications for home purchases instead.
With a shrinking refi business, however, some lenders may look to generate extra mortgage revenue by easing up credit standards to try to attract more loan applicants, The Wall Street Journal reports.
Source: “The End of the Mortgage Party? Home Lending Plummets at Wells Fargo, JP Morgan Chase,” The Wall Street Journal (Jan. 15, 2014)