MSR Hedging Boosts Wells Fargo's Results

Wells Fargo & Co., San Francisco, has reported that a $1.2 billion mark-to-market gain on financial instruments used to hedge its mortgage servicing rights more than offset a $638 million decline in the value of its MSRs during the third quarter, helping the company's mortgage business generate double-digit earnings growth despite lower origination volume.Wells Fargo valued its MSR asset at 1.35 basis points of the outstanding dollar volume of loans serviced for others, the lowest valuation ratio the company has recorded in eight quarters. Mortgage origination volume totaled $68 billion in the third quarter, down by $9 billion from the prior-year quarter. Wells Fargo owned the servicing rights on $1.48 trillion of home loans, up 11% from one year earlier. Overall, the company earned $2.28 billion in the third quarter, up 4% from the third quarter of 2006. The company can be found online at http://www.wellsfargo.com.