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FEATURE Playing Monopoly? As one of the only financial institutions to remain wholly committed to mortgage lending, how is Wells Fargo's origination domination impacting the industry? By Chuck Green W experts say someone has to be top dog in that category, so why not Wells. Fargo's been one of the "more prudent banks" in that it didn't sustain the same losses as some of its primary competitors, like Bank of America and SunTrust, during the downturn. Consequently, Wells was better positioned to step in during the apex of the housing crisis, which was fortu- itous, said Thornberg, founding partner of Beacon Economics, a research and consulting firm spe- cializing in analyses of real estate markets. After all, given that a lack of credit could have stopped a slowly recovering market in its tracks, "you might argue the economy we're seeing now would be nowhere near as robust" had Wells not stepped up, he said. If one institution's going to Charles Thornberg said Wells assume control of private market share, it's Wells Fargo, added Clifford Rossi, an executive in residence and Tyser Teaching hile they might not go so far as to cast Wells Fargo Home Mortgage as an alpha dog among mortgage originators, some Fellow at the Robert H. Smith School of Business at the University of Maryland. "They know the mortgage lending busi- ness, which they've demonstrated, year after year." For example, he pointed out that Wells has managed its mortgage business "fairly well over time—better than most." Additionally, while it didn't entirely escape the mortgage crisis, among the major players then and now, Wells showed relatively good discipline in managing its risks, he explained. Weighing the Numbers A in 2010, Wells Fargo originated 1,047,363 loans, valued at more than $238,505,448,000. Second was Bank of America with ccording to the Mortgage Bankers Association (MBA), 581,248 loans for more than $136,836,583,000; JPMorgan, 326,281, generated more than $73,861,312,000; USCB, 201,614 for $39,537,776,000; and Citigroup, at 132,604, totaled more than $31,878,368,000. Among all origina- tors, there were 7,366,299,000 origi- nations, totaling $1,568,516,061,000. In May, the MBA announced it was increasing its mortgage origi- nation forecast for 2012 by almost $200 billion, due entirely to an increase in refinances. MBA now expects that mortgage originations will reach $1.28 trillion in 2012, up from $1.26 trillion in 2011. The most recent refinance esti- mates for 2012 reflect an upward revision of $188 billion from MBA's April forecast, driven by an increase in the pace of refi- nance applications and origina- tions, while purchase origination estimates were revised down- ward by $6 billion to reflect lower than previously expected home prices and weaker than previously expected home sales. With the 10-year Treasury yield still near record lows, mortgage rates continue to decline, as evidenced by rates in the MBA's Weekly Applications Survey, continuing to reach new lows for the series. Rates posted under 4 percent for several months and have been on a decreasing trend since March. Lower rates continue to provide incentive for borrowers to refi- nance. The MBA anticipates that rates will remain at their current level through the end of 2012 and that refinance volume will be $932 billion for 2012 compared with $858 billion in 2011. This is an upward adjustment of almost $40 billion from the previous forecast as data on mortgage applications continue to show el- evated levels of refinance activity. Purchase mortgage applica- tion activity remains stagnant, although with improving starts data, there is some upside potential to this picture, states the MBA. Purchase originations are expected to decrease slightly in 2012 compared with 2011, to around $390 billion from $400 billion. The MBA continues to expect a strong rebound in purchase originations in 2013, with volume reaching just under $640 billion, but there is significant downside risk to this forecast if the economy remains stuck in low gear. As rates increase and fewer eligible borrowers remain, refinance originations should drop sharply in 2013 to $400 billion. THE M REPORT | 35