Nonbank lenders in 2014 took their biggest share of the mortgage market since at least 1995, new data show, as several large banks pulled back on lending to all but the most pristine borrowers.
According to federal government data released Tuesday, nondepository independent mortgage companies in 2014 accounted for 47% of loans to buy homes for owner-occupants and 42% of refinancing loans. Those market shares increased from 43% and 31%, respectively, in 2013.
The home-purchase share last year was 12 percentage points higher than in 2010.
The increasing prominence of nonbank lenders came as the total number of mortgages made in 2014 plummeted 31% from the year before to six million, according to the Federal Financial Institutions Examination Council. The drop was driven by a 55% plunge in refinances, which were stifled by higher interest rates. Loans to buy homes in 2014 rose 4% to 3.24 million.
In the past few years, large banks, such as Wells Fargo & Co., J.P. Morgan Chase & Co., and Bank of America Corp. , have ceded chunks of the mortgage market to fast-rising nonbank lenders and community banks, partly because of the severe penalties big banks were slapped with for mistakes that had been made during last decade’s housing boom.
Although nonbanks played a larger part in the subprime housing boom and bust, many of those lenders have since closed or been acquired. Fast-rising nonbank lenders, such as Quicken Loans Inc. and loanDepot LLC, nowadays tend to issue mortgages that qualify for government backing from Fannie Mae, Freddie Mac, the Federal Housing Administration or the Veterans Administration.
Still, some worry that the rise of nonbanks could introduce more risks into the mortgage market.
Ted Tozer, president of Ginnie Mae, in a speech on Monday said the increasing role of independent mortgage banks has introduced new risks into the system. Ginnie is a government-owned corporation that guarantees bonds backed by mortgages insured by agencies such as the FHA and VA.
see more at: http://www.wsj.com/articles/number-of-new-mortgages-in-2014-plunges-31-from-year-before-1442931356
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