Wells Fargo Says 2Q Mortgage Income Flat

The mortgage banking business added $2.8 billion to Wells Fargo’s noninterest income in 2Q13, similar to 1Q13 and down slightly from $2.9 billion in 2Q12.

The San Francisco-based company had record income of $5.5 billion for the period, up 19% from 2Q12.

Analysts at Keefe, Bruyette & Woods had predicted a 6% decline in mortgage banking income at Wells Fargo.

Residential mortgage originations topped the $100 billion mark for the seventh consecutive quarter, at $112 billion, up from $109 billion in 1Q13 but down from $131 billion in 2Q12. But the company noted its gain-on-sale margin declined “as expected” on a quarter-to-quarter basis, to 221 basis points from the first quarter’s 256 basis points. For the second quarter last year, gain on sale was 220 basis points.

Showing the shift in the market as interest rates started to rise at the end of the quarter, refinance applications had a 56% market share, down from 69% in 1Q13. By channel, $62 billion came through its retail network and $50 billion through correspondent and wholesale purchases.

Wells Fargo made a $65 million provision for mortgage loan repurchases, compared with $309 million in 1Q13.

On the servicing side, its total delinquency and foreclosure ratio for 2Q13 was 6.65%, up 11 basis points from the first quarter on seasonality but down from 7.14% in 2Q12.

The fair value of its mortgage servicing rights increased $2.1 billion during the period to $14.2 billion.

Total servicing income was $393 million, compared with 1Q13’s $314 million and 1Q12’s $679 million.

The residential MSR portfolio consists of $1.5 trillion of loans serviced for other investors and $358 billion of loans on its balance sheet, for a total of $1.9 trillion.

It also services $525 billion of commercial loans, including $409 billion for other investors.