Wells Fargo & Co. saw third-quarter profits rise 11 percent to $2.19 billion, despite a 36 percent decline in revenue from the bank’s home mortgage division.

Third quarter earnings of 64 cents per share were driven by increased consumer and business lending, the company said.

At $923 million, revenue generated by the Wells Fargo Home Mortgage division was down $502 million from $1.4 billion in the third quarter of 2005.

Excluding the Home Mortgage division, Wells Fargo’s combined revenue was up 13 percent from third quarter 2005. Businesses with double-digit, year-over-year revenue growth included commercial real estate, regional banking, merchant card services, credit cards, debit cards, corporate trust, asset-based lending, commercial banking and insurance.

Although the $104 billion in mortgage originations for the quarter was $12 billion less than the previous quarter, it was about the same as the $103 billion recorded in the third quarter of 2005 — a quarter in which long-term interest rates increased 51 basis points.

Third-quarter mortgage applications totaled $95 billion, down from $108 billion in the second quarter and $116 billion in third quarter 2005.

The bank added $215 billion to its owned real estate portfolio during the third quarter, which now stands at $1.33 trillion — a 42 percent increase from the same time last year.

Mark Oman, senior executive vice president, Home and Consumer Finance Group, said the bank’s “economies of skill and scale” and the ability to cross sell and retain servicing customers helped the bank acquire $172 billion in loan servicing during the quarter.

“Our servicing business benefits from a slower housing market as lower prepayments result in a lower rate of (mortgage servicing rights) amortization,” Oman said in a statement.

Refinances made up 41 percent of mortgage applications, up from 34 percent in the second quarter but about the same as the third quarter 2005, when 43 percent of applications were for refi’s.

Wells Fargo’s overall credit quality remained “acceptable” in the third quarter, said Chief Credit Officer Mike Loughlin. Loss rates for consumer real estate loans remained largely unchanged at .17 percent, but charge-offs for revolving credit and installment loans increased from 2.37 percent to 2.86 percent of average loans. Third quarter net credit losses were $663 million, or an annualized rate of .86 percent of average loans outstanding, compared with $541 million, or .73 percent of loans outstanding in the same quarter last year.

Loughlin blamed a $150 million increase in consumer auto loans losses on collection capacity constraints and restrictive payment extension practices in the spring of 2006, when Wells Fargo Financial began integrating its prime and nonprime auto loan businesses.

Loughlin said Wells Fargo Financial has since cut back on higher-risk new auto loans and hired 1,000 additional collectors and managers, but expects losses will remain above normal through “at least the fourth quarter.”

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