Wells Fargo's Servicing Fees Top $1 billion in 4Q.

SAN FRANCISCO -- Wells Fargo & Co. kept is earnings growth streak alive in 2006, but with little help from the company's mortgage unit in the fourth quarter. The mortgage unit weakness came in spite of Wells posting more than $1 billion in servicing fee income.

And Wells Fargo's results may be an early harbinger of industrywide troubles in the mortgage sector due to economic conditions that have persisted into the new year.

While Wells reported a corporatewide revenue increase of 8% in 2006, the home loan unit saw its revenue contribution fall to $4.2 billion from $4.9 billion in 2005. Meanwhile, revenue from the rest of Wells Fargo increased 12% last year, with almost all business lines other than home loans producing double-digit revenue growth.

But even as the Wells Fargo home loan and home-equity unit posted disappointing financial results, it continued to pick up market share in the competitive mortgage lending arena. Wells Fargo said its mortgage origination volume grew to $398 billion in 2006, up 9% from the year before.

But in the fourth quarter, Wells Fargo produced $70 billion of mortgage originations, down 20% from the fourth quarter of 2005.

On the positive side, Wells Fargo said that its gain-on-sale margin for mortgages increased slightly in the fourth quarter, reflecting strong secondary market demand.

Wells also said that its pipeline of home loan applications at the end of the fourth quarter, at $48 billion, was only down slightly from its pipeline of $50 billion a year earlier.