Fresh Mortgage Originations Hit A 12-Year High In Q3, But Largest U.S. Banks Didn’t Benefit Much

Mortgage origination activity levels in the U.S. saw a small uptick in Q3 2018, with data compiled by the Mortgage Bankers Association showing that $457 billion in mortgages were originated in the country over the quarter – up from $452 billion in Q2 2018. While this was well below the $490-billion figure a year ago, the year-on-year decline can be attributed purely to a sharp reduction in mortgage refinances over recent quarters due to the Fed’s ongoing rate hike process. In fact, fresh mortgage originations for Q3 2018 reached $346 billion – the highest level since Q3 2006 – thanks to an upbeat economic outlook and seasonally increased activity levels. Also, mortgage refinances were responsible for just 24% of total mortgage originations for the quarter, which was the lowest proportion since Q3 2000.

While the improved market for home loans is a good thing for the U.S. banking industry, the five largest U.S. commercial banks have yet to gain from this trend. Their total mortgage origination volume fell from almost $101 billion in Q2 2018 to below $97 billion in Q3 2018 – something that can be attributed to the fact that these banks have a stronger hold on the mortgage refinancing market.

We capture the impact of changes in mortgage banking performance on the share price of the banks with the largest mortgage operations in the U.S. – Wells Fargo, U.S. Bancorp, JPMorgan Chase and Bank of America – in a series of interactive dashboards.

Overview Of Results

Wells Fargo has remained the largest mortgage originator in the country since before the economic downturn. While the bank was focused on the mortgage business for decades before the downturn, it tightened its grip in the industry after 2008 thanks to its acquisition of Wachovia – originating one in every four mortgages in the country in early 2010. Although weak conditions in the mortgage space dragged down Wells Fargo’s market share to a low of 11% on a couple of occasions in the past (including Q4 2015 and Q2 2018), the bank’s growth restriction resulted in the figure falling to a low of just 10% in Q3 2018.