Predictions On Top 5 Banks And Their Mortgage Plans

It might be argued that the big boys have no qualms about losing a few points off their “lock” on the industry. Image: Fotolia.

A new year is about to begin—one in which loan production will decline by roughly 15%—and what better time to take the pulse of the nation’s megabanks, who still dominate this business but are seeing their market share nicked by more nimble competitors, nonbanks included.

Then again, it might be argued (to some degree) that the big boys have no qualms about losing a few points off their “lock” on the industry—just in case Basel III becomes the law of the land (eventually) and servicing rights can no longer feed the core capital bucket.

• First up, Wells Fargo. File this one under “exception to the rule.” Wells is the only megabank among the top three that hasn’t stumbled badly in the business. Yes, it announced its intention to bolt wholesale lending in the summer, but the latest production figures show that its exit from table funding is as slow as Heinz Ketchup.

In 3Q the bank table-funded $8 billion through loan brokers, double what it did a year ago—and a $1 billion increase from the second quarter. If this is a withdrawal, I wonder what an acceleration would look like. On the servicing front its MSRs grew to $1.88 trillion at Sept. 30, giving it a market share of 19.91%. Its 3Q growth rate was 4%, nothing to brag about but a number that suggests maybe the bank is in no rush to look like a total mortgage hog. It knows that all the new MSRs it’s writing will stick around for a long, long time.

• JPMorgan Chase. Jamie Dimon’s love for loan brokers is well known: he hates them. JPM dumped the broker business two years ago and hasn’t looked back. In the third quarter its residential originations increased to $50 billion, a 29% gain over 12 months. But still, its production volume is almost one-third of Wells Fargo’s. Does it care? Not likely. It should be pointed out that last month when JPM won the bid for MetLife’s $70 billion servicing portfolio, many in the industry found their jaws hanging low, this columnist included. It’s been so long since JPM bought a servicing portfolio that no one can remember back that far. The bank is carefully—but aggressively—growing its retail channel and recently inked a deal to buy new loan origination software from a rival, Quicken Loans. That tells you something.

• U.S. Bank. Is this institution really a megabank or a super-regional? It ranks among the top five in deposits and has been steadily growing its presence in residential finance since the bust of 2008. It ranks seventh in retail production, third in correspondent and fifth in wholesale. (We have heard no rumors about an exit from wholesale, in case you’re wondering.) Among the top 10 servicers, it ranks sixth overall with $260 billion in MSRs, according to figures compiled by National Mortgage News and the Quarterly Data Report. It also has the second highest growth rate among the top 10 processors. It avoided subprime lending like the plague and is now reaping the benefits of being a survivor.

• Bank of America. What can we say about B of A that we haven’t covered extensively in print and on the NMN website? The bank is selling legacy MSRs like crazy and doesn’t seem to care too much about price. At Sept. 30 it had $1.4 trillion in servicing rights on its books, a 24% decline over 12 months. Two years ago it had almost $2.2 trillion in MSRs. Wholesale? Gone. Correspondent? Gone. Warehouse lending? It shifted that business over to its Merrill Lynch affiliate where maybe 40 accounts have survived. Reverse lending? Long gone from that sector as well. When refis finally slow, it likely will start laying off retail loan officers unless they happen to be married to a home builder or Realtor. Mortgage outlook for the future: cloudy at best.

• CitiMortgage. You might call this “B of A Lite.” Over the past two years Citi axed wholesale, scaled back significantly in correspondent and is also trimming its presence in servicing. A huge corporate layoff was unveiled last month where 11,000 workers were given pink slips. In all fairness, the cuts were worldwide and not just in the U.S. But Citigroup has yet to provide any color on how its U.S. mortgage group will be affected. We’re still waiting.