When it comes to analyzing mortgage origination numbers, it's a matter of relativity.
Many lenders—with the exception of Bank of America—are reporting strong production volumes for the third quarter compared to the second.
But compared to the third quarter of 2010, the results hardly look rosy. Wells Fargo & Co., for instance, funded $89 billion during the third quarter, a nice improvement from the second quarter, but a 13% drop from a year ago.
Smaller lenders such as Guardian Mortgage, Richardson, Texas, and Cherry Creek Mortgage of Denver had similar results—up compared to 2Q but down when measured against the year-ago period.
Chase, now the nation's No. 2 ranked mortgage firm, funded $33 billion of product, up 6% from 2Q, but half of what it produced a year ago.
B of A, not unexpectedly, had a horrible quarter in residential fundings, writing just $33 billion of new loans, a 20% decline from the second quarter, and a 43% plunge from 3Q10. (The bank, the perennial No. 2 ranked funder, has slipped to No. 3 in the rankings behind Wells and Chase, respectively.)
The banking giant's fundings are expected to drop in the quarters ahead as it finally closes its correspondent unit, leaving it with just one channel—retail. Wells is in all three channels and Chase in two, but not wholesale.
Thanks to the European debt crisis, the yield on the benchmark 10-year Treasury continues to hover at around the 2% level and many lenders (except B of A) are optimistic about the next two quarters.
One key driver of this optimism is the Obama Refinance Plan where lenders will be able to write new loans for “underwater” GSE borrowers regardless of the loan-to-value ratio and without fears of having to repurchase such product.
But when the White House unveiled its plan in October it was light on details.
Specific guidelines could be ready by mid-November and housing analysts are uncertain how much additional loan production such a plan might add to next year's origination numbers.
It's anticipated that the GSEs will not allow consumers that have already engaged in a HARP refi to do so again, a stipulation that will reduce the program's results. However, it's always possible that the GSE overseer, the Federal Housing Finance Agency, might eventually change its mind on this detail.
Many mortgage firms are poised for the additional business, but continue to fret about what the market will look like when refis eventually subside next spring.
According to figures compiled by National Mortgage News, over the past four quarters refis have accounted for 68% of all new production.
The latest production figures from the Mortgage Bankers Association had the refi share at close to 80%.
