RTC Mortgage Blog

Mortgage Lending Shifts from Large Banks to Non-Banks

April 13th, 2015 9:31 AM by Richard T. Cirelli

Mortgage Lending Shifts from Large Banks to Non-Banks

According to a new study released by the American Enterprise Institute’s International Center on Housing Risk, there has been a huge shift in home purchase loan originations away from large banks to nonbanks. Since November 2012, the large bank share has dropped from 61% to 33%.

The dramatic decline in the large bank-lending share has been met by a huge increase in the nonbank share, which has risen from 24% to 51%. Additionally, large banks are the only lender type with a net decline since November 2012

What’s a Non-Bank?

Simply put, a Non-Bank Mortgage Lender is a financial institution that is not considered a full-scale bank because they do not offer both lending and deposit services. Non-bank mortgage companies or “mortgage bankers” make mortgages, period! They are not distracted by offering other services. As in independent mortgage broker, RTC Mortgage Corporation mostly brokers loans to non-bank lenders although we can also choose to broker to banks.

Why Are Non-Banks Gaining Market Share?

The study cited several of the factors below, most of which pertain not only to Non-Banks but also independent Mortgage Brokers too. Here’s why Non-Banks and Mortgage Brokers are gaining market share:

  • Non-Banks are less regulated and therefore face less litigation risk, while the big banks have had to face huge fines and penalties imposed by the Government for past violations
  • Non-Banks have a shorter-term outlook and can adapt to changes in market demand more readily
  • Non-Banks primary business is just mortgage-banking compared to the more diversified business lines of large banks
  • Non-Banks typically provide better Customer Service due to localized processing, underwriting and funding functions
  • Non-Banks are better able to handle the more complex transactions with greater efficiency
  • Non-Banks typically offer more products & because they can securitize/sell their loans to multiple resources
  • Non-Banks usually offer better rates/lower costs due to much lower overhead than Banks

Sales of Vacation Homes Skyrocket!

Last year, vacation properties accounted for an amazing 21% of all sales - up 57.4% from 2013 on a national level! While I don’t have statistics on the local market, I’ll bet that the share of homes sold as second or vacation homes is even higher, particularly along the California coast and the high-tech Bay area.

Part of this rise is due to Baby Boomers buying second homes to eventually retire to, while part is being fed by strong gains in financial markets. Locally, it is also fueled by the better quality of life and weather, foreign money, and stronger employment markets.

Meanwhile, sales of investment homes fell 7.4% and owner-occupied purchases were 60% of all sales.

Posted by Richard T. Cirelli on April 13th, 2015 9:31 AM



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