Q2 2015 U.S. Banking Review: Mortgage Originations

-0.97%
Downside
193
Market
191
Trefis
JPM: JP Morgan Chase logo
JPM
JP Morgan Chase

The U.S. mortgage industry witnessed an exceptionally strong level of activity over the second quarter of the year, with data compiled by the Mortgage Bankers Association showing that $395 billion in mortgages were originated over the period. [1] This compares to origination figures of $330 billion for the previous quarter and $297 billion for the year-ago period, and makes Q2 2015 the best quarter for the industry since Q3 2013. Notably, the $225 billion in fresh mortgage originations for the quarter was the highest figure for any quarter since Q4 2007.

An increase in mortgage activity is good news for the country’s biggest banks – especially for Wells Fargo (NYSE:WFC) and U.S. Bancorp (NYSE:USB), who bulked up their mortgage banking businesses considerably after the economic downturn. In this article, we highlight the changes in mortgage origination volumes for each of the country’s five largest commercial banks over recent years.

See the full Trefis analysis for Wells FargoJPMorganU.S. BancorpBank of AmericaCitigroup

Relevant Articles
  1. Up 38% Since The Start Of 2023, What Is Next For JPMorgan Stock?
  2. Up 6% In The Last Six months, What’s Next For JPMorgan Stock?
  3. JPMorgan Stock Topped The Consensus In Q2
  4. What To Expect From JPMorgan Stock?
  5. What To Expect From JPMorgan Stock In Q1?
  6. Is JPMorgan Stock Fairly Priced?

The mortgage industry has been extremely volatile since early 2005 – with a boom in 2005-2007 followed by the crash that contributed to the economic downturn. As the economy recovered from the recession, record-low interest rates and government-led incentives gave a boost to the industry in 2011-2012, when homeowners rushed to get their mortgages refinanced to benefit from the improved interest rate environment and lending terms. Refinancing activity dried up soon, though, and without much improvement in the demand for fresh mortgages, Q1 2014 saw the lowest mortgage origination volumes since Q3 1997. Things did not improve much till Q2 2015 – when the impending rate hike by the Fed gave potential homeowners a reason to apply for mortgages before mortgage rates head north.

The table below summarizes the volume of mortgages originated by each of the country’s five biggest banks since Q1 2013. The data has been compiled using figures reported by individual banks as a part of their quarterly announcements. Total market figures are taken from the MBA’s historical mortgage origination data. It should be noted that all the banks include refinanced mortgages in addition to fresh mortgages as a part of their total origination figure for a period.

(in $ billions) Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Q4’14 Q1’15 Q2’15
Wells Fargo 109.0 112.0 80.0 50.0 36.0 47.0 48.0 44.0 49.0 62.0
JPMorgan 52.7 49.0 40.5 23.3 17.0 16.8 21.2 23.0 24.7 29.3
Bank of America 25.0 26.8 24.4 13.5 10.8 13.7 14.9 15.0 16.9 19.2
U.S. Bancorp 21.7 17.8 15.2 8.6 6.2 8.0 10.4 10.4 10.9 13.4
Citigroup 18.0 17.2 14.5 8.3 5.2 6.2 7.1 6.7 7.0 8.8
Top 5 Total 226.4 222.8 174.6 103.7 75.3 91.7 101.7 99.2 108.5 132.7
Total Market 477.0 572.0 469.0 326.0 247.0 297.0 300.0 278.0 330.0 395.0

Wells Fargo remains the undisputed leader when it comes to mortgage originations. The bank has originated more home loans than its four closest competitors combined in eight of the last 15 quarters. In fact, Wells Fargo was responsible for originating one in every three mortgages in the U.S. in early 2012. Its market share has shrunk over the years, though, settling around 15%. With a mortgage banking division that remained largely unchanged even after the recession, JPMorgan comes in at a rather distant second with a market share of under 8%. With its revamped business model, Bank of America has consolidated its position at the third position in this list with a market share of roughly 5%. The country’s largest regional banking group, U.S. Bancorp, has done well since the downturn to figure higher on this list than its significantly larger rival Citigroup.

Notably, the market share of these five banks put together has fallen considerably since mid-2012 – shrinking from 53% in Q2 2012 to just above 30% in Q1 2014 before hovering around 35% over the last few quarters. This is because banks gained considerably in 2011-2012 when people with existing mortgages refinanced their loans under the government’s HAMP initiative with large banks instead of smaller lenders or credit unions. Refinances were responsible for nearly 75% of all mortgages originated between Q4 2011 and Q1 2013 – a figure that fell to 43% in Q2 2015.

The chart below provides mortgage origination volume figures for each quarter since Q1 2005, and makes it easy to see how the market share of each bank has changed over the last decade.

MortgageOrigination 15Q2

View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. MBA Quarterly Origination Estimates, Mortgage Bankers Association []