New York: Wells Fargo & Co, already the largest US home lender, won the biggest market share ever recorded as competitors led by Bank of America Corp pulled back after suffering more than $65 billion in combined mortgage losses.

Wells Fargo made 33.9 per cent of the $385 billion of mortgages originated in the first quarter, up from 30.1 per cent in the preceding three months, according to Inside Mortgage Finance. That's more than triple the share of the closest competitor, JPMorgan Chase & Co, with 10.6 per cent. US Bancorp moved into third place from fifth, with 5.2 per cent, ahead of Bank of America, with 4.2 per cent.

"They pulled back while others hit the accelerator on subprime so now they are able to take advantage," Joseph Morford, an RBC Capital Markets analyst, said of San Francisco-based Wells Fargo in a phone interview. "They've always been disciplined."

Concerns

The lender is dominating mortgage markets as housing shows signs of bottoming after a six-year slump and homeowners benefit from record-low borrowing costs. Wells Fargo, also the biggest home-loan servicer, posted $2.9 billion in mortgage-banking income in the first quarter, a $506 million increase from the fourth quarter. Chief Executive Officer John Stumpf, 58, has posted a profit in 13 straight quarters.

Wells Fargo's control raises concerns that US consumers and the housing market may suffer if the bank falters, said Glen Corso, a managing director of the Community Mortgage Banking Project, a coalition of smaller independent lenders.

"Anytime you start to have market concentration with a single company you worry about the disruption should that company stumble," he said. "The federal government should be looking at this."

The bank's market share exceeded the combined total for the next seven largest lenders, Inside Mortgage Finance, an industry publication based in Bethesda, Maryland, said in an e-mail to subscribers Wednesday. Wells Fargo originated $357 billion of mortgages last year, according to company statements.

The company avoided some of the mortgage missteps that afflicted rivals such as Bank of America, once the largest home lender. The Charlotte, North Carolina-based firm recorded more than $40 billion of costs tied to faulty home loans and foreclosures.

Expenses have topped $72 billion at the biggest US banks, including Wells Fargo, after housing slumped 35 per cent from a 2006 peak.

Wells Fargo executives have said it wasn't their goal for the company to become the largest lender. Refinancings have bolstered market share, according to Chief Financial Officer Timothy Sloan. These will account for about 62 per cent of the market, or $682 billion this year, according to projections from the Mortgage Bankers Association.

Competition

"If we're talking about the business two years ago, I don't think we would have imagined that our market share would be where it would be today," Sloan said during a May 1 investor conference. "We're going to continue to be focused in the business. We're going to continue to want to grow it." Sloan said the lender doesn't expect regulators to raise concerns about its market share. While refinancings have buoyed results, so has less competition.

Bank of America, which purchased Countrywide Financial Corp in 2008, scaled back mortgage-lending operations to reduce assets that regulators deemed risky and shifted resources to service troubled loans. Last year, CEO Brian T. Moynihan, 52, stopped reverse-mortgage lending and shuttered a business that bought loans from correspondent providers. The firm will focus on selling home loans to existing customers of the retail bank or wealth-management division, Moynihan has said. Among the targeted customers, "we underperformed, but we're doing exactly what we wanted, which is to focus on direct- to-retail," Moynihan told analysts last month. "You'll see us improve there."

Bank of America has missed out on the surge in refinancing, with its ability to handle applications crimped earlier this year. Some customers were asked to wait as many as 90 days before being serviced. Countrywide was the largest US mortgage lender as recently as 2007.

Wells Fargo said mortgage originations climbed 7.5 per cent in the first quarter from the preceding three months. The unclosed pipeline stood at $79 billion at the end of the quarter, up from $72 billion at year-end. Mortgage origination and sales accounted for 24 per cent of all fee revenue, according to a presentation.

Once in a lifetime

US Bancorp, whose balance sheet is about one-seventh the size of Bank of America's, sees an expansion in the mortgage business as a "once-in-a-lifetime" opportunity, Richard Davis, the CEO of the Minneapolis-based lender said April 17.

Home-lending revenue more than doubled in the first quarter to $452 million, from $199 million last year, Davis said.

"The small and medium guys are picking up some of the slack created by several of the larger lenders reducing their presence in the market," Willie Newman, Cole Taylor's head of residential-mortgage originations, said in a phone interview.

Taylor Capital Group Inc, the bank's Chicago-based parent, said last month that the lender's originations rose 14.4 per cent from the fourth quarter to $894.9 million.

Mixed signals

Among the large banks, ‘several' have reported plans to reduce their dealings in the mortgage market either ‘somewhat or substantially' in the next 12 months, according to the Federal Reserve's Senior Loan Officer survey, published April 30. A ‘moderate' number of banks said they planned to increase their exposure, according to the Fed.

Interest rates on new US home loans are lower than yields on the mortgage securities, which they're packaged into. The gap between the cost of 30-year loans and benchmark Fannie Mae yields has widened to about 0.96 percentage point.