JSMedia – In 2020, Americans took out more mortgages than they did in 2019. In that year, non-banks issued 68.1% of all mortgages, an increase from 58.9% in 2019. This market share is the highest in recent history, and marks the largest yearly gain since 2014. According to the report, non-bank mortgage lenders were responsible for a large part of the rise in the number of loans made to minority borrowers.
As the economy continues to recover, non-bank lenders continue to dominate the home lending market. In 2019, they made 56.4% of all home purchase loans, up from 56.1% in 2018. In addition, non-banks continued to lead in refinancing, a crucial sector for lenders. While traditional banks continue to shrink their mortgage lending, non-banks continue to fill the gap.
Despite the tighter lending environment, non-bank mortgage lenders continued to pick up market share. As a result, the non-bank mortgage market is larger and stronger than it was a decade ago. Most securitization activity is done through government-supported entities and mortgage credit quality is much higher than before the financial crisis. The non-bank sector has become as large as it was in 2007, despite the tighter credit environment.
Non-Bank Mortgage Lenders Continued To Pick Up Market Share
In 2012, six of the 10 largest mortgage lenders were non-banks compared to two in 2011. As a result, the non-banks’ market share continues to grow at a rapid pace. The first two years of the recession saw the biggest growth in non-bank mortgage lending, and in 2019 it is projected to reach 70 percent by 2020. The growth of these companies is largely driven by the outperforming non-banks, which focus on innovation, differentiation, and a strong digital focus.
The market for non-banks was overwhelmingly dominated by a few non-banks. The top 10 non-banks accounted for 62 percent of originations, while the two-year-old non-banks accounted for a mere two percent. Their growth is mainly attributed to their aggressive digital focus and differentiated value proposition. The market is also changing in terms of lending standards.
However, the largest non-banks have not diversified their portfolio. HMDA data for the first time in two years only reported on 5,479 originations, purchased loans, and refinancing in 2019. The bottom 25 lenders accounted for 44 percent of all originations and 77 percent of all purchases. In this year’s survey, many non-banks specialized in serving minority borrowers.
While many were concerned about the liquidity of non-bank mortgage servicers in March 2020, the vast majority of these lenders did not face a liquidity crisis. This was largely attributed to lower than expected forbearance rates, the role of government-sponsored enterprises, and other factors. The data do not reveal whether non-banks have a high risk of defaulting, but the borrowers are still at risk.
The number of non-bank lenders continued to grow, but the rate of decline in the past two years is more than double what it was in the first half of last year. While the trend is encouraging, the recent slowdown has been accompanied by a decrease in the number of borrowers in the housing market. But non-banks continue to lend to low-income borrowers, despite the sluggish economy.
The number of non-bank mortgage lenders continues to grow. Despite a slowdown in the property market, the number of non-banks continues to rise, owing to their higher risk tolerance. Interestingly, the ratio of investor loans continues to fall, although it is lower than in the last two years. The report notes that the number of non-banks is still a significant part of the mortgage lending market.
In the United Kingdom, non-bank mortgage servicers serviced almost a quarter of the nation’s $9.9 trillion home mortgages between 1977 and 2015. While the share of non-bank entities grew from 3% in 1997 to 36% in June 2015, the numbers continued to grow. In the last three years, the number of non-banks has tripled and the amount of RMBS issued by these organizations reached near pre-crisis levels in 2018.