Although mortgage loans, both commercial and residential, have seen much higher foreclosure rates, some banks, including Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC), have found ways to make significant revenue from their mortgage divisions.
The nation’s two largest home lenders, Bank of America and Wells Fargo, posted fourth quarter earnings last Wednesday that benefited from better-than-expected profits from their mortgage operations.
The profits that the two banks earned aren’t necessarily reflective of the health of the company’s overall mortgage portfolios, which are still generating higher than desired defaults and losses for the two companies. However, the firms have benefited greatly from moves by the government to support the mortgage market.
Wells Fargo and Bank of America, along with other companies in the mortgage industry, are instead benefiting by originating new home loans, nearly all of which are bought or guaranteed by the Fannie Mae, Freddie Mac or the Federal Housing Administration.
During the fourth quarter of 2009, Wells Fargo originated $94 billion worth of new mortgages and Bank of America originated $84 billion, a sharp increase from the mortgage volume they saw during the fourth quarter of 2008.
