Residential lenders will continue to enjoy high gain-on-sale margins during the remainder of the second quarter, but those profits will be down compared to 1Q—which was exceptional—according to new research from Credit Suisse.
CS analyst Moshe Orenbuch writes in a new research paper that large cap banks will enjoy an average gain-on-sale margin of 300 basis points in 2Q compared to 350 bps in the first quarter.
Orenbuch adds that second quarter spreads “should come in well above” the nine-quarter average of 230 basis points “which should support healthy production revenues next quarter.”
One industry consultant told National Mortgage News recently that some lenders he has reviewed have already earned more money in 2012 than they did for all of last year.
Loan production volumes, so far, have defied the expectations of industry economists, some of whom thought 2012 would be a disaster. Instead, originations may equal last year’s volume of $1.4 trillion.
The better outlook has been bolstered by changes to the HARP (underwater) refinancing program, and another round of declining interest rates thanks to problems over in Europe.
CS is expecting strong mortgage profits from mortgage giant Wells Fargo & Co., but also several midsized banks including: BB&T, SunTrust and Fifth Third.
