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The Office of the Comptroller of the Currency's Mortgage Metrics report showed further reductions in delinquencies and homes seized by lenders in the fourth quarter.
March 27 -
All mortgage lenders should prepare themselves for a minimum decline in refinance activity of 75% and make sure their capital plan, liquidity plan and budget all reflect this.
March 21 -
Purchasing $34 billion of servicing rights would provide Quicken with a steady income stream that could help offset the inevitable decline in refinancing activity.
March 21
The mortgage industry’s leaders are once again betting they can grab a bigger slice of a shrinking pie.
The Mortgage Bankers Association has projected
The rate on a 30-year mortgage has increased about 30 basis points since early December, according to the MBA. The trade group’s index of refi activity, while volatile, has generally been lower in the first quarter than the fourth quarter.
The gap between the interest rates consumers pay on new mortgages and the rates on bonds into which they are packaged — a proxy for the profit lenders earn when they make new loans, since the relationship between asset prices and yields is inverted — remains elevated by historical standards, but has also dropped from levels observed in the third and fourth quarters.
Last month, analysts at KBW estimated a 20% drop in gain-on-sale margins and an 8.5% reduction in originations from the fourth quarter at SunTrust (STI) would cut about 7% off their forecast for the company’s earnings per share in the first quarter. “There could be building pressure on the company to make good on its operating efficiency programs sooner than later,” they wrote.
But in a presentation in March, SunTrust Chief Executive William Rogers said that while profit margins had been narrowing since the third quarter, the company was optimistic about volume in part because of an expansion in the platform through which it sells mortgages directly to borrowers by phone and online.
Similarly, PNC Financial (PNC) President William Demchak told investors last month that his company anticipates higher production this year. “Capacity constraints prevented us from capturing more of the origination market for much of 2012,” he said. So “we significantly increased our capacity to process and underwrite originations by expanding our two main operation sites and bringing a new Florida site online.”
More lending infrastructure explains much of the profit margin squeeze, since competition pushes consumer rates down. And, according to the KBW analysts, cost cuts are unlikely to keep up: there is less room to maneuver on the cost to produce loans.
As the housing market improves, lenders are looking to an anticipated pickup in home purchase loans to cushion the deceleration in refinancing. They are also counting on
Wells Fargo (WFC) attributed its
U.S. Bancorp (USB) CEO Richard Davis told investors, “the decision we made four years ago to triple the size of our mortgage business” was among the company’s proudest moves. “So far so good.”