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Home >> Daily Dose >> Nonbanks are Grabbing a Larger Market Share
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Nonbanks are Grabbing a Larger Market Share

Out of the nearly 7,000 financial institutions that reported Home Mortgage Disclosure Act (HMDA) data for 2015, the largest increase in market share was seen in non-depository financial institutions (40.1 to 43 percent).

While nonbanks continued to gain market share, things went the other direction for banks in 2015. Banks’ share of the mortgage market declined by 2.9 percentage points, while the credit union share of the mortgage market held steady at 6.1 percent from 2014 to 2015.

The year 2015 continued a substantial shift in market share for nonbank lenders, which have seen their share rise from 27 percent in 2010 up to 43 percent 2015, according to HMDA data.

“Banks have real capital and multiple lines of business,” said Ed Pinto, Codirector and Chief Risk Officer, International Center on Housing Risk, American Enterprise Institute. “The nonbanks have only one line of business, and that's originating and servicing mortgages. They don't have much capital compared to banks. But it's easier for them to expand in the mortgage space because they are willing to take on the risks. They don't have the reputational risks that banks have to deal with if a loan goes bad and goes into foreclosure.”

While this is generally happening across the industry, it is happening even moreso with agency purchase originations, Pinto said. For example, nonbanks, as of March 2016, had more than a 70 percent share of FHA purchase originations while large banks' share in that space was below 20 percent. This represented a reversal from 2012 (just as it has across the industry), when large banks held about a 65 percent share of FHA purchase originations compared to about 28 percent for nonbanks.

In the HMDA data, the only other segment reporting an increase in market share was institutions regulated by the OCC (national banks and savings institutions). This segment saw its mortgage market share inch up by 0.6 percentage points from 2014 to 2015 (from 5.8 percent up to 6.4 percent).

“While credit unions did not see growth in market share, it is encouraging to see them maintain share in a growing market, while banks’ market share declined,” Callahan & Associates director of industry analysis Sam Taft said. “This could be due to consumers continuing to trust credit unions with their real estate financing needs and increasing visibility throughout the country of the value proposition credit unions offer.”

A total of 6,913 institutions reported HMDA data for a total of 14.3 million loans in 2015, according to FFIEC. In 2014, more institutions reported (7,062) HMDA data on fewer loans (11.9 million).

The mortgage market shares of various financial institutions reported in the HMDA data was consistent with the data reported by Bankrate.com earlier this year which found that banks’ market share declined from 47 percent in 2014 down to 43 percent in Q4 2015. Meanwhile, nonbanks’ share of the mortgage market increased from 44 percent to 48 percent from Q4 2014 to Q4 2015 and credit unions’ market share stayed flat at 9 percent, according to Bankrate.com.

According to Bankrate.com, Wells Fargo was the largest mortgage lender in the country in Q4 2015 with $47 billion worth of mortgage loans originated, more than double the volume of the second-ranked JPMorgan Chase ($23 billion). The top-ranked nonbank lender was Quicken Loans, which placed third behind Wells Fargo and Chase with $19 billion in loans originated in Q4 2015, according to Bankrate.com.

About Author: Seth Welborn

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Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.

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