Risky Business

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the latest or ig i nat ion ORIGINATION Origination Indicators Pointing in the Right Direction a na ly t ic s se r v ic i ng A recent report shows that origination margins are trending positively. W Wells Fargo Leads the Pack in Mortgage Originations S e c on da r y M a r k e t The megabank is the top commercial and multifamily mortgage originator for last year. W ells Fargo has another jewel to add to its crown: The Mortgage Bankers Association (MBA) ranked the bank as the top commercial/ multifamily mortgage originator for 2012. For its report, MBA studied the origination volumes and roles of 111 different commercial/ multifamily mortgage originators and categorized the findings in more than 140 categories, including by role, by investor group, by property type, by financing structure type, and by location of the originating office. Wells Fargo was 2012's top overall originator, with estimated annual volume of $524 billion. Other top originators include Bank of America (BofA) Merrill Lynch, PNC Real Estate, Prudential Mortgage Capital Company, and KeyBank Real Estate Capital. 40 | The M Report Wells Fargo also ranked as the top originator for commercial mortgage-backed securities (CMBS) and for investment portfolios. In addition, Wells was one of the top originators of loans for Fannie Mae; Freddie Mac announced in February that Wells Fargo Multifamily Capital was its third biggest multifamily seller (tied with Holliday Fenoglio Fowler). Among other categories: BofA Merrill Lynch was the top originator for commercial bank loans, while Red Mortgage Capital, LLC, was No. 1 for loans guaranteed by Ginnie Mae or the Federal Housing Administration. Cohen Financial was the top originator for specialty finance. Commercial/multifamily origination volume grew 24 percent in 2012, MBA reported in February. The group forecasts $254 billion in originations for 2013, an 11 percent growth over last year. hile gain-onsale margins decreased in the fourth quarter of 2012, KBW Mortgage says margins "remain elevated," while originations ticked upward, leaving the firm to report a "generally positive" fourth quarter for the mortgage banking industry. Of the eight banks for which KBW obtained gain-on-sale margin data, only two reported increases in the fourth quarter, and those were relatively meager. PHH reported a 0.06 percent increase, and Wells Fargo reported a 0.35 percent increase over the quarter. Ally experienced the greatest decline with a 1.14 percent drop in gain-on-sale margin over the fourth quarter of last year. Despite the quarterly declines, all eight banks continue to post yearly increases, according to KBW. KBW suggests refinances— particularly HARP 2.0 refis—are contributing to the strong gainon-sale margins throughout the industry. Other contributing factors include capacity constraints and strong application demand due to low interest rates, according to KBW. While Inside Mortgage Finance reported a 2.9 percent increase in originations in the fourth quarter, up to $525 billion, KBW reported a 1.1 percent increase among the top 25 originators in the nation. Volume at these banks increased from $385 billion to $389 billion. Year-over-year, volume at the top 25 originators increased 11.6 percent. These large originators experienced a slight decline in market share in the fourth quarter. After claiming 75.5 percent of the market in the third quarter, their share reached 74.2 percent in the fourth quarter. Wells Fargo claimed the greatest percentage of originations in the fourth quarter, with 23.9 percent of all originations taking place at the large bank. JPMorgan Chase claimed the second-largest share: 10.3 percent. Seven of the top 25 originators experienced declining origination volumes in the fourth quarter. While only a few banks divulged application volume to KBW, the trend the firm found matched what the Mortgage Bankers Association (MBA) observed in the fourth quarter: declining volumes. MBA reported a 4 percent decline, while KBW noted a few large institutions recorded declines well above this industry average. For example, JPMorgan Chase experienced a 10.2 percent decline in application volume in the fourth quarter, while Wells Fargo experienced a 19.1 percent decline. In general, "much of the volume continues to be concentrated with the GSEs and the Federal Housing Administration (FHA)," according to KBW.

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