Big Banks Avoid Mortgage Risk, Lose Market Share

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4 · 01 · 15

New data indicate that as large banks have cut their risk on agency mortgage lending, they have lost market share.

As of November 2012, large banks were responsible for 61 percent of loan originations to finance home purchases.

But as of December 2014, big banks’ share of home purchase financing had plummeted to just a third.

That was according to a study announced by
the AEI International Center on Housing Risk.

At the same time, non-bank mortgage lenders have seen their market share
soar to more than half as of year-end 2014 from less than a quarter in November 2012.

Data maintained by Mortgage Daily indicate that banks’ share of residential loan originations was an estimated 40 percent in the fourth-quarter 2014, tumbling from 46 percent a year earlier.

But non-banks have pushed up their market share from 44 percent to 50 percent during the same period.

Credit union market share inched up to 11 percent in the fourth-quarter 2014 from 10 percent in the fourth-quarter 2013.

With the shift in market share, large banks have reduced risk on agency originations, while non-banks have moved toward riskier loans.

“This shift is due to the fact that non-banks compared to large banks are more thinly capitalized and more lightly regulated, generally face less reputational and litigation risk, and tend to have a shorter-term outlook,” the report stated. “Additionally, their primary business is generally just mortgage banking as compared to the more diversified business lines of large banks.  Therefore they have a more limited ability to stay on the sidelines.”

Washington-based organization explained that if banks want to increase their market share, they will have to take on more risk.

AEI noted that shifting market share has been more pronounced on Ginnie Mae loans.

Mortgage Expert

Mortgage Daily Staff



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