While margins are declining from record 2012 levels, volumes are still expected to remain relatively strong on the back of continued refinancing activity and an uptick in new home loan originations as the housing recovery strengthens, the companies said.
"Mortgage volume is coming down, but not as fast as some folks may have thought," Wells Fargo CFO Tim Sloan said during the analyst conference call.
Wells Fargo has the largest market share in mortgage originations, with refinancing activity currently accounting for a bulk of its business.JPMorgan CFO Marianne Lake said during the company's analyst call that mortgage applications were starting to edge higher in the second quarter after declining earlier in the year and said refinance volumes were likely to stay high. She said the bank also expects to gain market share in the space during the course of the year. Mortgage production revenue at JPMorgan declined to $1.2 billion, down 25% from a year earlier. The bank earned lower profits from the sale of mortgages to investors. Gain-on-sale margins for the quarter were at about 100 basis points, the bank said, down from historically high levels in 2012 in excess of 120 basis points. The long-term average margin is 65 basis points, Lake said. Still, JPMorgan reported a 37% jump in mortgage originations to $52.7 billion, reflecting gains in market share. Wells Fargo, on the other hand, saw originations decline to $109 billion from $129 billion in the corresponding previous quarter. Its pipeline of mortgage deals that had not yet closed dropped to $74 billion in the first quarter from $84 billion in the fourth quarter and $79 billion a year earlier. But Wells said it expects volumes to hold up as more first-time home buyers seek mortgages. Purchase activity at the bank is up 31% year-over-year. "That is really important for us," CEO John Stumpf highlighted to analysts. "This is a really important consumer product and we have made investments in the business. Housing is improving every day, people have more equity in their homes and Americans have still not lost their attachment to homeownership."
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