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Conditions for the mortgage industry have improved in the second quarter, but Wells Fargo is not optimistic




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BURBANK, CA – JUNE 2: General atmosphere in William Shatner's Priceline.com Hollywood Charity Horse Show Hosted by Wells Fargo at the Los Angeles Equestrian Center on June 2, 2018 in Burbank, California (Photo by Greg Doherty / Getty Images)

The US mortgage industry witnessed a rebound in activity in the second quarter The optimistic economic outlook contributed In the first quarter of 2018, total mortgage revenues improved from $ 346 billion in the first quarter of 2018 to $ 447 billion in the second quarter of 2018. The unusually low issuance volume in the two previous quarters can be partly attributed to the seasonal nature of the industry In recent years, a marked slowdown in mortgage activity due to the US Federal Reserve's ongoing interest rate hike has been delayed eichnen.

Remarkably, the five largest US commercial banks benefited from improved conditions in the industry and saw their profits. The volume of mortgage loans rose to nearly $ 101 billion in the second quarter of 2018 from less than $ 87 billion in the first quarter of 2018 However, the figure is well below the $ 112 billion in mortgage lending issued a year ago. And the situation is not expected to improve in the foreseeable future, a view that has been reinforced by recent plans by industry leader Wells Fargo to eliminate 638 mortgage jobs. The banking giant is reducing the size of its mortgage lender in light of the significant reduction in new mortgage lending in recent quarters and also because of low credit default rates (as it now requires a smaller standard service team).

We Record the Impact of Mortgage Banking on Wells Fargo in our Interactive Dashboard How Mortgage Bank Changes Affect the Valuation of Wells Fargo . You can make changes to all the important factors and assumptions to see how changes affect the value of the bank.

Wells Fargo remains the leader

Wells Fargo has remained the largest mortgage lender in the country since the economic downturn. While the bank has always focused on the mortgage business, it has tightened after the recession thanks to the acquisition of Wachovia in the industry – one of the country's top four mortgages in early 2010. Although weak conditions in the mortgage sector subsided Wells Fargo's market share in the fourth quarter of 2015 was 11%. The Bank's market share has been around 12.5% ​​in recent quarters.

Trefis

* The total number of US origins includes both new mortgages and mortgage refinancing The Mortgage Bankers Association

In addition, the combined market share of these five banks has dramatically increased by over 50% in recent years. reduced to only 23% in 2011. One of the main reasons for this was the significant decline in mortgage lending by Bank of America and Citigroup, having suffered tremendous losses as a result of the recession. However, the decline in mortgage market share for US banks as a whole has boosted credit union growth across loan categories

As the Federal Reserve is expected to raise interest rates until at least the end of 2019, we believe the mortgage industry will be subdued over the next five to six quarters Pressure will remain. As soon as the interest rate environment returns to normal at the beginning of 2020, rising mortgage rates will deter potential homeowners less and the issue volume should grow again.

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BURBANK, CA – June 2: General atmosphere on William Shatner's Priceline.com Hollywood Charity Horse Show hosted by Wells Fargo at the Los Angeles Equestrian Center on 2 Burbank, Calif., June 25, 2018. (Photo: Greg Doherty / Getty Images)

The US mortgage industry rebounded in the second quarter as an optimistic economic outlook helped reverse mortgage lending in the US $ 346 billion While the unusually low issuance volume in the previous two quarters was partly due to the seasonal nature of the industry, mortgage activity has also noticeably slowed in recent years due to the US's ongoing interest rate hike Notary bank.

Remarkably, the five largest U S-US commercial banks of improved conditions in the industry and were able to increase their volume from nearly 87 billion US dollars in the first quarter of 2018 to almost 101 billion US dollars, but the figure is well below the $ 112 billion they took a year ago – a clear indication of the continuing headwind in the industry. And the situation is not expected to improve in the foreseeable future, a view that has been reinforced by recent plans by industry leader Wells Fargo to eliminate 638 mortgage jobs. The banking giant is reducing the size of its mortgage lender in light of the significant reduction in new mortgage lending in recent quarters and also because of low credit default rates (as it now requires a smaller standard service team).

We Record the Impact of Mortgage Banking on Wells Fargo in our Interactive Dashboard How Mortgage Bank Changes Affect the Valuation of Wells Fargo . You can make changes to all the important factors and assumptions to see how changes affect the value of the bank.

Wells Fargo remains the leader

Wells Fargo is the country's largest mortgage lender since the economic downturn. While the bank has always focused on the mortgage business, it has tightened after the recession thanks to the acquisition of Wachovia in the industry – one of the country's top four mortgages in early 2010. Although weak mortgage conditions subsided Wells Fargo's market share was 11% in the fourth quarter of 2015, with the Bank's market share at around 12.5% ​​in recent quarters.

* The entire US origins include both new mortgages and mortgage refinancing by the Mortgage Bankers Association

In addition, the combined market share of these five banks in recent years has increased dramatically from over 50% in 2011 to just now still 23% declined. One of the main reasons for this was the significant decline in mortgage lending by Bank of America and Citigroup, having suffered tremendous losses as a result of the recession. However, the decline in mortgage market share for US banks as a whole has boosted credit union growth across loan categories

As the Federal Reserve is expected to raise interest rates until at least the end of 2019, we believe the mortgage industry will be subdued over the next five to six quarters Pressure will remain. As soon as the interest rate environment returns to normal at the beginning of 2020, rising mortgage rates will deter potential homeowners less and the issue volume should grow again.

Like our graphics? Sample interactive dashboards and create your own


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