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Wells Fargo “25% of Mortgages Were Home Purchases Not Refinancings”

Posted on | April 13, 2009 | No Comments

wells-fargo-mortgageLast week Wells Fargo showed healthy gains in the stock market as they posted a $3 billion first quarter profit.  Part of the reason that Wells Fargo showed such a large profit was the fact that they got Wachovia at wholesale prices.  While Wachovia was very poorly run and had some subpime exposure, there was still value in the company as it is one of the largest banks on the east coast.  When you combine one of the largest banks on the east coast with the king of the west coast, profits have a chance to soar.

Not only was the acquistion of Wachovia a notch on the belt of Wells Fargo, so was the mortgage market.  With rates hitting historic lows, Wells Fargo stated that mortgage applications jumped 64% to $190 billion, $84 billion in March alone.  Like many mortgage lenders, Wells Fargo is struggling to keep up with the amount of mortgage applications so they are actually increasing their staff to keep up with the demand.

Bank of America and Citi jumped on the wagon by saying that they would be profitable for the first three months out of the year.  Do not get Wells Fargo confused with Bank of America and Citi.  Wells Fargo has very little exposure to subprime, almost none before the Wachoiva acquistion.  The subprime exposure that Bank of America and Citi have almost caused them to go bankrupt.  It is highly likely they would have gone bankrupt if the government would not have stepped in.

Overall, Wells Fargo feels that the mortgage market is healthy as mortgage applications increase with 25% of mortgage being home purchases rather than refinancings.  My question remains, are these mortgage applications getting approved?  I do not see a huge drop in new housing supply so how can their be an increase in home purchases?  Maybe the data will reflect these home purchases in the next few months; only time will tell.

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