Mortgage income returns to “normal times”


At many banks, mortgage income declined in the second quarter as last year’s refinancing crisis ended and increased competition led to lower margins on the sale of loans.

Falling interest rates in recent weeks could partly reverse the pressure, prompting more homeowners to refinance and continue to fuel new home buying demand. But lower mortgage yields in the last quarter indicate that the record highs in the second half of 2020 were, according to bankers and analysts, an outlier.

“Basically, we are going back to more normal times in mortgages,” said Jim Mabrey, chief financial officer of Renasant Corp. in Mississippi, where net income from mortgage sales fell by almost half in the second quarter.

Mortgage income fell between April and June at both large and small banks. At JPMorgan Chase, mortgage fees fell from $ 704 million in the first quarter to $ 551 million, about half what megabank reported in the third quarter of 2020. At Citizens Financial Group, the percentage decline has declined. was even more – from $ 276 million in the second quarter of 2020 to just $ 85 million in the last quarter.

And in Columbus, Georgia, mortgage banking revenue fell to $ 13.84 million from $ 22.3 million in the first quarter and $ 31.23 million in the third quarter of 2020.

The downturn in Synovus is partly due to the $ 15.2 billion bank holding more mortgages on its balance sheets instead of selling them in the secondary market dominated by Fannie Mae and Freddie Mac, but private label securitizers are also being bought up. loans for packaging and sale to investors. Another factor: Synovus made less profit from the sale of loans, executives said.

“This is a very competitive market,” Kevin Blair, president and chief operating officer of Synovus, told analysts during a conference call. “We expect there will continue to be some pressure in this area.”

In the second quarter, fewer homeowners refinanced their loans as interest rates rose, resulting in a decline in lending to banks.

According to Kevin Barker, managing director of Piper, the decline in refinancing demand has led to “excessive competition” among lenders, especially non-banks that dominate the refinancing market. Sandler.

The pressure may ease somewhat. Rates have fallen recently as the COVID-19 delta option cloudes the economic outlook and helps nudge investors towards bonds, pushing up their prices and lowering their yields.

After a sharp rise earlier this year from record lows, the average weekly 30-year fixed rate mortgage peaked at 3.18% on April 1 and has largely fallen over the past month. The average rate on a 30-year fixed mortgage fell to about 2.80% in the week ending July 29. market reviews from Freddie Mac.

According to Marina Walsh, vice president of industry research at the Mortgage Bankers’ Association, refinancing activity has been “picking up steam” recently, with borrowers who missed out on last year now have another chance to refinance at ultra-low rates.

The group’s weekly refinancing index, which has mostly declined this year, the Rose up 9% in the week ending July 23, before falling 2% last week. Its purchase index is at its lowest since May 2020, according to the Mortgage Bankers Association. Lack of home inventory continues to drive home prices skyrocketing and discourage potential buyers.

Despite the recent rate cuts, “it’s hard to break a record every year,” and many homeowners have already taken advantage of refinancing, said John Tuhig, managing director of Raymond James, which helps ease the sale of loans.

At the moment, banks’ CFOs are trying to decide whether to sell less loans in the secondary market, where they can receive upfront income, or stick to them for a little longer and gradually earn interest income, Tuhig said. He noted that the excess of deposits in banks led to the need to redistribute funds and receive interest income.

“But at the same time, they also need this commission income – profit from sales – as soon as possible,” he said. “So CFOs are in real conflict with their thoughts about ‘where should I go’ right now.”

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