This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Wells Fargo's Expense Cuts Can Offset Declining Mortgage Volume

Stocks in this article: BAC WFC FNMA FMCC

NEW YORK ( TheStreet) -- Wells Fargo (WFC) is facing a decline in mortgage loan demand and mortgage banking revenue, but the bank stands ready to quickly cut its expenses as volume declines.

Wells Fargo has emerged as a big winner from the financial crisis, becoming the nation's dominant mortgage lender, with a 27.7% share of newly originated loans during 2012. Much of Wells Fargo's mortgage growth has come at the expense of Bank of America (BAC), which greatly scaled back its loan origination activity in the wake of the financial crisis.

Bank of America's ill-timed acquisition of Countrywide Financial in 2008 has caused the bank to focus for years on working through mortgage repurchase claims from investors and other parties. Then again, the company may be ready to become a major competitor to Wells Fargo, now, following a major settlement with Fannie Mae (FNMA) in the first quarter, the ending of objections to its $8.5 billion proposed mortgage putback settlement with institutional investors in 2010 and with its groundbreaking settlement with MBIA (MBI) on Monday.

A decline in mortgage origination fee revenue and gains on the sale of new loans in the secondary market has been expected for the major mortgage lenders. The Mortgage Bankers Association estimates that one-to-four-family mortgage loan origination volume will decline to $1.478 trillion this year from $1.750 trillion during 2012. Refinancing volume was very high last year, because of the record-low mortgage rates, and because the expanded Home Affordable Refinance Program, or HARP 2.0., allowed qualified borrowers to refinance their entire balances, no matter how much the market value of the collateral home had declined.

The Mortgage Bankers Association expects total U.S. one-to-four-family mortgage loan origination volume to decline further in 2014, to $1.091 trillion.

Gains on the sale of mortgage loans -- usually to Fannie Mae and Freddie Mac (FMCC) -- have also been declining because of a rise in long-term market interest rates and because of the greater availability of mortgage credit as the banks and the economy strengthen.

Wells Fargo reported first-quarter mortgage banking income of $2.794 billion, declining from $3.068 billion in the fourth quarter and $2.870 billion during the first quarter of 2012. First-quarter mortgage loan originations declined to $109 billion from $125 billion the previous quarter. Net gains on mortgage loan origination and sales totaled $2.5 billion in the first quarter, declining from $2.8 billion in the fourth quarter and from $2.6 billion in the first quarter of 2012.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs