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Banks Don’t Rule the Mortgage Industry Anymore

November 16, 2016

Step aside banks, there’s a new sheriff in the mortgage lending industry.

According to a new analysis by Inside Mortgage Finance, nonbank lenders gave out 51.4 percent of mortgage loan dollars in the third quarter of 2016, The Wall Street Journal reported. That’s up from the 46 percent of total mortgage originations they had for all of 2015, the source noted. Overall, these lenders have accounted for 48 percent of mortgage originations this year, according to 24/7 Wall Street. These institutions have been making up a lot of ground on banks in recent years, as new research is demonstrating.

In a new S&P Global Market Intelligence report on the largest mortgage originators, four major banks still held the top spots, but 12 nonbank lenders appeared on the list as well, according to the Austin Business Journal. The market has been favoring buyers this past year, and low interest rates have caused an increased interest from people in purchasing homes, the source explained.


Another trend that emerges from recent data is a higher loan approval percentage. Mortgage approval rates hit rock bottom in 2007 at 40 percent, but rates have climbed back up to 52.5 percent, the Austin Business Journal reported. The massive gains of nonbank lenders in the mortgage industry can be attributed to low default rates, according to The Wall Street Journal. Some are concerned that nonbank lenders will be in trouble if delinquency rates start to go up, but others are not so worried because the government insures many of these loans.

And although it seems like banks are losing ground, some are simply changing their focus to targeting wealthier borrowers with jumbo mortgages, which are valued at $417,000 or more, 24/7 Wall Street reported.

It is yet to be seen how new regulations from the Consumer Financial Protection Bureau will impact lending in 2017.


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