Both Wells Fargo and JPMorgan Chase reported increased gain-on-sale margins, a good sign for mortgage industry results yet to come for the first quarter, a Keefe, Bruyette & Woods research note said.
Among the drivers of the higher gain for Wells Fargo was
"So while we expect mortgage banking earnings to remain under pressure, gain-on-sale margin trends from JPMorgan Chase and Wells Fargo suggest that revenues have likely bottomed," George wrote. The research note also covered PNC Financial's results to a lesser extent.
For the full year,
In this year's first three months, Wells Fargo reported a gain on sale of $76 million or 115 basis points, compared with a loss of $71 million or 49 basis points in the fourth quarter.
Total mortgage banking income — both originations and servicing — was $160 million, up from $23 million in the fourth quarter but
For the same period at Chase, margins grew to $75 million or 132 basis points from $43 million or 64 basis points.
Total mortgage income rose to $223 million from $90 million in the previous quarter but down from $456 million one year ago.
PNC's gain on sale increased 6 basis points from the fourth quarter to 2.26% from 2.20%.
Origination volume declined modestly at Chase, but because of the correspondent exit, more substantially at Wells Fargo. PNC also had a larger drop off in production than Chase, he noted.
Chase originated $5.7 billion, down from $6.7 billion on a quarter-to-quarter basis and $24.7 billion year-over-year. Compared with the fourth quarter, its correspondent volume was flat at $2.1 billion.
At Wells Fargo, purchases via the correspondent channel fell to $1 billion from $6.4 billion in the fourth quarter. Its retail originations slipped to $5.6 billion from $14.6 billion. For the first quarter of 2022, Wells reported $24.1 billion of retail and $13.8 billion of correspondent volume.
Total originations at PNC fell to $1.4 billion from $2.1 billion in the fourth quarter and $5.1 billion in the first quarter of 2022.
A 3.6% quarter-to-quarter decline in the servicing rights valuation at Wells to 1.32% was also in line with KBW's expectations given the
JPMorgan Chase no longer reports this information, but George calculated the MSR carrying value fell one basis point to 1.35%.
PNC reported a 3 basis point quarter-to-quarter decline in its MSR valuation to 119 basis points.
Both the origination and servicing results "were largely in line with our expectations for our coverage universe" going forward, George said, specifically pointing to independent mortgage bankers Rocket Cos., UWM Holdings, PennyMac Financial Services, Rithm and Mr. Cooper.