WASHINGTON–Americans took out more mortgages than ever before in 2020, but most of them didn’t come from traditional banks, according to a new analysis.
Nonbank mortgage lenders in the U.S. issued 68.1% of all mortgages originated in 2020, up from 58.9% in 2019, according to Inside Mortgage Finance. That is their highest market share on record and their biggest yearly gain since 2014, the analysis found.
Nonbank mortgage lenders have been gaining ground on banks for past decade, noted the Wall Street Journal.
“These lenders, which don’t take deposits or offer other banking services, have made up more than half of the market since 2016,” the Journal noted. “Seven of the 10 biggest U.S. mortgage lenders were nonbanks at the end of 2020, according to the research firm.”
Helping to drive the changing market: the pandemic ushered in an era of cheap money that supercharged their growth, the Journal reported, pointing out the average rate on the 30-year mortgage fell below 3% for the first time on record during 2020.
Nearly $4 Trillion
“Lenders of all stripes originated a record $3.83 trillion in home loans in 2020, according to the Mortgage Bankers Association,” the Journal said in its report. “But banks largely sat out the boom. Still smarting from massive losses on soured mortgages during the 2008-09 financial crisis, they shunned all but the safest borrowers and pulled back from the jumbo loans that had fueled their mortgage businesses in recent years. A surge in loan demand from corporate borrowers, meanwhile, strained their balance sheets.”
According to the Journal, among the non-banks that helped “fill the gap’ were Rocket Co.’s Quicken Loans, the nation’s largest mortgage lender, at which loan volume more than doubled in 2020.
Yet lenders are preparing for mortgage demand to cool in the coming months, the Journal stated, as the result of rising interest rates that makes refinancing less attractive for a large number of borrowers. Mortgage originations are expected to fall more than 9% to $3.47 trillion in 2021, according to the Mortgage Bankers Association.