On Friday, Wells Fargo, JPMorgan Chase, and Citi kicked off the second-quarter earnings season in the mortgage sector, reporting significant increases in sales volumes from April to June compared to the previous quarter.
However, these gains were not sufficient to match the home loan origination levels seen a year ago.
JPMorgan Chase Leads in Mortgage Production Among the three depositories, JPMorgan Chase led in mortgage production with a volume of $10.7 billion in Q2 2024, marking a 62% increase quarter over quarter but a 4% decline year over year. The bank’s retail volume was $6.9 billion, while its correspondent partners originated $3.8 billion.
Wells Fargo Focuses on Purchase Loans Wells Fargo, which exited the correspondent channel last year, reported $5.3 billion in mortgage production from its branches in Q2 2024, a 51% increase quarter over quarter but a 31% drop year over year. The bank focused primarily on purchase loans, which accounted for 87% of the total volume in this period.
“Credit performance during the second quarter was consistent with our expectations,” said Wells Fargo CEO Charlie Scharf. “Consumers have benefited from a strong labor market and wage increases. The performance of our consumer auto portfolio continued to improve, reflecting prior credit tightening actions, and we had net recoveries in our home lending portfolio.”
Citi, the smallest of the three in the mortgage space, originated $4.3 billion in home loans from April to June, a 39% increase from the previous quarter but a 4% decrease from the same period in 2023.
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JPMorgan Chase also expanded its servicing portfolio in the second quarter, with mortgage servicing rights (MSRs) increasing to $8.8 billion, up from $8.6 billion in Q1 2024 and $8.2 billion in Q2 2023. Conversely, Wells Fargo’s MSRs, measured by the carrying value at the end of the period, declined by 3% quarter over quarter to $7 billion in Q2 2024, with the unpaid principal balance (UPB) decreasing by 14% compared to the same quarter last year.
Home lending activity generated $1.3 billion in net revenues for JPMorgan Chase in Q2 2024, an 11% increase from $1.18 billion in the previous quarter. The bank also saw $189 million from servicing revenues, compared to $144 million in the previous quarter. “The performance of home lending revenues was predominantly driven by higher net interest income,” said Jeremy Barnum, JPMorgan’s chief financial officer.
Wells Fargo reported $823 million in revenues from its home lending business in Q2 2024. Home lending was down 3% year over year due to lower net interest income on lower loan balances and down 5% from the previous quarter due to lower mortgage banking income. According to CFO Michael Santomassimo, the revenue reduction reflects the bank’s focus on simplifying the home lending business and the ongoing decline in the mortgage market. Since the start of 2023, Wells Fargo has reduced its home lending headcount by approximately 45%.
The bank also generated $243 million in mortgage banking non-interest income in Q2 2024, up from $230 million in the previous quarter. However, its net servicing income declined by 2% quarter over quarter but increased by 44% year over year to $89 million.
JPMorgan Chase reported $18 billion in profits in the second quarter, or $13.1 billion excluding extraordinary items such as a multibillion-dollar gain tied to a Visa share exchange. CEO and Chairman Jamie Dimon noted some progress in reducing inflation but warned of ongoing inflationary pressures. “There are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world. Therefore, inflation and interest rates may stay higher than the market expects,” Dimon said.
Wells Fargo reported $4.9 billion in net income for Q2, while Citi reported $3.2 billion. Citi CEO Jane Fraser highlighted the bank’s progress in strategic and organizational simplification.