The biggest mortgage lender in the US sees something remarkable: Actual homebuyers


The numbers: Not so hot. Wells Fargo’s residential mortgage originations (i.e., mortgages on new homes and refinancing of existing ones) tumbled 60% compared to the fourth quarter of 2012. But even so, the bank’s net income rose 19% to $2.37 billion.

The takeaway: As the biggest US mortgage lender, Wells is a barometer of the health of the mortgage market as a whole. A rise in mortgage rates that started in May 2013—when the Federal Reserve first raised the prospect of cutting back on its monthly bond-buying program—choked off a refinancing boom that Wells had ridden for a streak of 15 straight profitable quarters. Since then, mortgage originations have slipped sharply, though the bank has managed to stay in the black.

What’s interesting: Wells doesn’t expect another refinancing boom any time soon. It is, however, expecting something the US mortgage market hasn’t seen nearly enough of in recent years: homebuyers. While Wells’ overall mortgage applications were down 60% in the fourth quarter, compared to the prior year, the decline has been concentrated in refinancing applications. Applications from potential homebuyers looking to purchase houses are up 35%. In fact, 68% of all applications were for purchases, rather than refinancing; in the fourth quarter of 2012 it was only 35%. “I think we’re getting into a more normalized mortgage market where you’re going to see a higher percentage of purchase[s],” Wells Fargo CEO John Stumpf told an assemblage of banking analysts back in December. When the largest mortgage lender in the US says something like that, it’s worth listening.

home our picks popular latest obsessions search