This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Obama's HARP Is Music to Bankers' Ears

Stocks in this article: WFCJPMBACSTIFITB

Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America (BAC) are the three biggest mortgage originators, although only Wells has really maintained and in fact grown its presence in the mortgage origination business.

Both Bank of America and JPMorgan have reduced their presence in this space. Bank of America's share of mortgage originations has declined from 25% in 2007 to 5% by the end of the fourth quarter of 2011.

Besides Wells Fargo, banks with an exposure to underwater states like Florida such as SunTrust (STI) and Fifth Third Bancorp (FITB) also stand to gain. Mortgage banking also accounts for a higher share of revenues at these three banks at 11%, 7% and 10% respectively compared to the industry average of 4%.

Not all of the revenue upside will flow to the bottomline, however. The analyst expects Wells Fargo to use the upside from mortgage revenues to accelerate its cost savings programs while SunTrust will likely channel the higher revenues towards meeting its higher mortgage repurchase claims.

Also, banks holding mortgage-backed securities will see a downside from lower yields on their balance sheet. But the analyst notes that "banks make more of the origination fees and lose less of the net interest income," given that they originate 70% of the mortgages but hold only 20% of agency-backed securities.

10 Dow Dogs That Are Barking for Gains



Also while the rising Treasury yields could result in mortgage yields creeping higher, Nomura does not anticipate a significant dip in refinancing activity under HARP. "HARP provides a fairly interest rate insensitive stream of income to the banks. Most borrowers going through HARP have interest rates of 5-6% on their loans. They would certainly prefer a 3.75% mortgage, but they will happily take a 4%, 4.25% or even a 4.50% loan as well."

--Written by Shanthi Bharatwaj in New York



>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to http://twitter.com/shavenk.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
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!

Markets

DOW 17,871.14 +43.39 0.24%
S&P 500 2,073.37 +0.54 0.03%
NASDAQ 4,810.33 +23.0130 0.48%

Brokerage Partners

Rates from Bankrate.com

  • 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