As reported by CTV on Thursday wells Fargo schocked the street by reporting they are expecting a record profit in the first quarter of $3 billion dollars, owing to their, wait for it….SURGING mortgage business. They are setting records for applications and fundings. Wow.
This is important, because there are still may people thinking we are heading down still, when there are many indicators suggesting not.
The other real good part of this was how this news affected the stock market. Investos are believing in the mortgage market again, albeit it will be a slow advance.
Barack Obama mentioned that refinance mortgage applications are up 88% in the the past 3 weeks alone. In fact Fannie Mae refinanced more applications in March then in any month SINCE 2003. YES BEFORE the refi boom of 2005-2008.
There are many correlations to our market here in Canada. The biggest one is that in the boom times this type of mortgage business (refinancing at lower rates) was bad for banks and thus their profitability. Wells Fargo and many of the other banks have shown that even these kinds of loans can be very profitable. Why you ask? Here is where the correlation to our market. The spreads are so good for lenders right now that the loans they are making are much more profitable. The reason for this is mainly because many of the irrational lenders are gone and who is remaining are returning back to sound conservative lending and investors are willing to come back and give them money.
This coming week will have more good news as all the other major banks will be reporting their quarterly earnings and expectations are that they will be much better then people expected. Once the banks prove to the markets that they are solid and profitable, the market will soar, mark my words.
This is yet another sign of a recovery being imminent. Those that don’t like this talk just go back and read Garth Turners blog and you will get your fill of negativity.
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