WASHINGTON–There has been a gradual but dramatic shift in the institutions that dominate the mortgage lending market.
An analysis by the Washington Post found that the big banks that have always been the traditional mortgage market players have given way too many other players, most especially non-banks. But that tide could flow once more the other way, the Post report stated, as rates rise.
According to the Post, in 2011, 50% of all new mortgage money was loaned by the three biggest banks in the United States: JPMorgan Chase, Bank of America and Wells Fargo. But by September 2016, the share of loans by these three big banks dropped to 21%.
At the same time, the Post reported, six of the top 10 largest lenders by volume were non-banks, such as Quicken Loans, loanDepot and PHH Mortgage, compared with just two of the top 10 in 2011.
The Post quoted Paul Noring, a managing director of the financial-risk-management practice of Navigant Consulting, pointing to the mortgage crisis of 2008-09 as driving many big banks out of the market.
“That was a tsunami for everyone in the mortgage business, and we’re still seeing the fallout,” Noring told the Post. “Lenders were not prepared to deal with it and didn’t do a great job, plus new rules were coming out that they needed to follow.”
But big banks may push their way back into the mortgage market, according to the Post analysis, as rates rise.
“We’re likely to see more banks come back into the mortgage market as interest rates rise, because there’s more profit to be made,” one analyst told the Post. “But demand will be down because fewer people will refinance and because affordability issues will mean that first-time buyers are still missing from the market.”