I don't think other financials will post similar results to those posted by Morgan and Wells on Friday and is likely to not benefit these firms going forward. 70% of mortgage originations are refinancings and are a bi-product of rate declines over the last 12 months adding about $1 billion to the bottom line for both of these firms. As rates stabilize or rise we will see this tail wind disappear or turn around.
In addition as 2nd mortgages (approx $100 Billion at both firms) mature and the 50% of borrowers who only pay interest will need to add principal reduction to these payments we should expect the delinquencies in these portfolios to rise and higher provisions in the future periods. If rates rise, these delinquencies will only rise further.
Overall, the numbers posted by both firms were good but probably not sustainable