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  • Frank Tian

🏚️ US banks’ Q4 Update - Mortgage

The mortgage origination continued to collapse.


The top 4 banks - JP Morgan Chase, Bank of America, Citi, and Wells Fargo - collected mortgage originations down 75% in the quarter compared to a year ago.


It is down 72% vs. the average in the last 3 years.


Why?


The interest rate.


In 2022, the Fed hiked the interest rate 7 times in a row. The total 400 bps increase is the fastest in history.


That puts tremendous pressure on buyers, as fewer people can afford the high purchase prices.


Even if the Fed did not target the housing market specifically, the cooling of demand has an immediate impact on the largest purchase of consumers.


📌 Notable move:


Wells Fargo, once the No. 1 mortgage lender, decided to scale back.


It is exiting the correspondent business - stop being the receiver of the originate-to-sell mortgages underwritten by third-party lenders.


Wells Fargo will focus on existing bank and wealth management customers and borrowers in minority communities.


Post the 2008 subprime financial crisis, large banks gradually retreat from the mortgage market.


Sources: banks’ financial reports; CNBC.


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