Nonbank Lenders Now Make Up Largest Share of U.S. Mortgage Market

According to a recent article in the Wall Street Journal, for the first quarter in more than 30 years, banks, credit unions and other depository institutions collectively represented less than half of mortgages issued in the U.S. The market is now led by nonbank lenders, which extended 51.4% of mortgages in the third quarter. Nonbank lenders’ share of the mortgage market has grown relatively rapidly. In 2011, only two firms among the nation’s ten largest mortgage lenders by origination volume were nonbanks, but as of September 2016 that number has increased to six.

This shift is explained, in part, by traditional banks' retreat from the market. Many have downsized mortgage lending operations in response to a number of lawsuits brought by federal regulators related to these types of loans. As a result, some have raised concerns around problems with liquidity that some nonbank lenders might face and what that might mean for the broader mortgage market. However, some nonbank lenders find fears to be exaggerated. Bob Walters, chief economist at Quicken Loans, responded to concerns by stating “We are not taking on credit risk-the loss is borne by [government] agencies. As long as there is a government guarantee, that is a powerful leveling factor that keeps the flow of funds going.”

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