The Real Deal Miami

Non-bank lenders take big share of mortgage market

The Federal Reserve says non-banks originated 47% of home-purchase loans last year

November 08, 2015 10:00AM

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Nonbank lender Quicken Loans is the second-biggest retailer of mortgages, behind Wells Fargo.

Nonbank lenders accounted for 42% of home-loan refinancing last year, up from 31% in 2013.

Banks are losing market share in the home-loan business to non-bank mortgage companies unaffiliated with a depository institution.

A bullish sign of the times is a recent filing with the Securities and Exchange Commission by Irvine, California-based Loan Depot, a non-bank mortgage lender planning  an initial public offering of its stock.

Loan Depot and other non-depository independent mortgage companies last year accounted for 47 percent of mortgage loans for U.S. home purchases and 42 percent of mortgage refinancing, according to the Federal Reserve.

That is up from 43 percent of home-purchase mortgages and 31 percent of refinancing in 2013.

The Fed data for 2014 also represent the largest share of the mortgage market commanded by nonbanks since 1995.

Nonbank lender Quicken Loans is the second-biggest retailer of mortgage loans, behind top-ranked Wells Fargo Bank.

A Blackstone Group company called Finance of America Holdings is in position to become one of the biggest nonbank lenders in the United States following its recent acquisition of Gateway Funding Diversified Mortgage Services, Pinnacle Capital Mortgage and certain assets and operations of PMAC Lending Services Inc.

Conforming mortgages backed by Freddie Mac, Fannie Mae and the Federal Housing Administration comprise most non-bank lending.

Jumbo mortgage amounts exceed the conforming-loan limits of $417,000 in most parts of the nation and $625,000 in high-priced housing markets, among them New York and San Francisco

Guy Cecala, publisher and CEO of Inside Mortgage Finance, a trade publication, says non-bank lenders are targeting the jumbo mortgage market.

Some non-bank lenders now sell their jumbo loans to such financial institutions as Wells Fargo, insurance companies and REITs, or real estate investment trusts.

Selling jumbos in the secondary market reduces the credit risks of non-banks and allows them to meet or beat mortgage rates and terms offered by banks, Cecala told the Wall Street Journal.

Speedy service is a common selling point at non-banks. Jumbo borrowers with straightforward income can complete transactions with Quicken Loans fully online, often without speaking to a loan officer.

Jason van den Brand, CEO of Lenda, a San Francisco-based non-bank lender that refinances mortgages, said online nonbank lenders will have a growing competitive edge as more millennials born between 1981 and 2000, enter the mortgage market. [Wall Street Journal] — Mike Seemuth