BofA, PNC latest banks to report strong mortgage origination growth

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The second quarter continues to shape up as a good one for bank mortgage lenders — and one ancillary service provider — that are benefiting from a spike in volume.

Mortgage originations at Bank of America increased over 55% on both a quarter-to-quarter and year-over-year basis in the second quarter.

Total first-mortgage production, both from its consumer banking division and the global wealth and investment management segment, was $18.3 billion in the second quarter, compared with $11.5 billion in the first quarter and $11.7 billion one year prior.

Home equity lending volume continued to decline, falling to $2.77 billion from $2.83 billion in the first quarter and $4.08 billion for the second quarter of 2018.

But 33% of new mortgage applications for the period came through the digital channel, up from 20% in the first quarter.

BofA does not break out mortgage banking income separately. But noninterest income from consumer lending in the consumer banking segment was $78 million, up from $77 million in the first quarter but down from $88 million one year prior.

Noninterest income for the residential mortgage business at PNC Bank was $82 million in the second quarter, up from $65 million in the first quarter but down just 2% from $84 million in the second quarter of 2018.

The quarter-to-quarter increase was due to a positive adjustment to the value of its mortgage servicing rights and higher loan sales revenue, partially offset by lower servicing fee income.

PNC originated $2.9 billion in the second quarter, compared with $1.7 billion in the first quarter, an increase of nearly 70%. There was a 45% increase compared with the second quarter last year, when PNC had $2 billion of volume.

But the share of purchase volume was down to 54% from 56% in the first quarter and 71% in the second quarter last year.

PNC's mortgage servicing rights portfolio ended the quarter at $124 billion, up $1 billion from March 31, and flat compared with one year ago.

The strong increases in volume join those at Citi, Wells Fargo and JPMorgan Chase.

Title insurer results are tied to origination activity, and the nation's largest underwriter, Fidelity National Financial, reported a 39,000-unit year-over-year increase in direct orders opened. This is compared with a 40,000-unit year-over-year decline in the first quarter.

There were 544,000 direct orders opened in the second quarter, compared with 438,000 in the first quarter and 505,000 in the second quarter last year.

But just 61% of the second-quarter orders were for home purchases, compared with 71% one year ago.

FNF reported a second-quarter net profit of $266 million, with the title unit earning $290 million, and its corporate and other segment losing $24 million.

This is an increase from the $251 million it earned at the holding company level, with net earnings of $269 million at the title company.

"The second quarter was a very strong performance for our title business," said FNF Chairman William Foley in a press release. "We generated adjusted pretax title earnings of $363 million and a 17.7% adjusted pretax title margin, both of which were our best quarterly performance since the third quarter of 2003 nearly 16 years ago.

"With strong second-quarter refinance orders opened, an improving trend in purchase orders opened and continued strength in commercial orders opened, we are well positioned to continue to produce strong financial results in our title business as we enter the second half of 2019."

FNF extended the deadline to close its proposed acquisition of Stewart Information Services for the second time; the new date is Sept. 18.

"We continue to work with the Federal Trade Commission and the New York State Department of Financial Services to seek approval of the proposed acquisition. If the approvals are obtained, we remain confident that the Stewart acquisition can create meaningful long-term value for our shareholders," Foley said.

The New York regulator rejected the initial application for the deal based on market share concerns as the combination would control 50% of the state's title insurance market on a pro forma basis.

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Earnings Stocks Originations MSR Refinance Purchase Bank of America PNC Fidelity National Financial