[ by Melanie Gretchen ]

Wells Fargo is not experiencing a mortgage crisis.

Wells Fargo, the San Francisco-based bank, celebrated 11 straight quarters of gains in net income – almost 3 years –  buoyed by $4.9 billion in profit for the third quarter.  The earnings represented a 22% jump largely led by a booming mortgage business.  The largest mortgage lender made $188 billion in home mortgage applications, an 11% jump from the third quarter of 2011.

A Well(s) of Fortune? As the bank's revenue increased, shares decreased, suggesting many pieces played into Wells's overall puzzle.  Things to consider:

• Revenue: $21.2 billion in revenue, which surpassed the $19.6 billion figure from a year earlier
• Growth: Since the mortgage crisis, Wells Fargo has risen to create roughly a third of all mortgages in the country: total outstanding loans jumped slightly in the third quarter to $783 billion while the bank's home mortgage originations increased 56% to $139 billion
• Wholesale banking, which includes the sales and trading business along with the corporate lending division, increased its profit by 11%, to $1.9 billion
• Shares: Friday closed down 2.6% to $34.25, in part because the bank's own investments suffered from an environment of low-interest rates.
• Lawsuits: (i) last summer, the bank agreed  to pay $175 million to settle Justice Department accusations that it discriminated against certain minority homeowners from 2004 to 2009; (ii) Wells Fargo, which denied the charges, was also sued this week by federal prosecutors in New York, who claim the bank defrauded the government and lied about the quality of the mortgages it handled under a federal housing program.

• A program by the Treasury Department is driving refinancings, which produced (i) 14% of the mortgage volume and (ii) a demand for credit, toward 72% of all home loan applications
• The Federal Reserve has introduced a long-term plan to buy large batches of mortgage-backed bonds, (i) which should help keep rates low and (ii) which has driven the bank's profit in the community banking division, which includes Wells Fargo's retail branches and mortgage business, by 18% to $2.7 billion.
• Wells Fargo makes home loans before selling most of them to investors after attaching a government guarantee. Those gains totaled $2.61 billion in the third quarter, up 22% from $803 million in the third quarter of last year.

For further details, go to [Dealbook, 10/12/12].