More buyers are bypassing big, established banks and turning to a growing subset of specialized lenders to obtain a mortgage.
Last year, a “nonbank” called Freedom Mortgage originated $51.1 billion in home loans, more than Citigroup Inc. and Bank of America Corp., according to research from business news publication Inside Mortgage Finance. Freedom has risen from being the 78th largest mortgage lender in the U.S. in 2012 to the 11th largest today.
Nonbanks have re-emerged since the last housing crisis and are taking more business from traditional banks, now accounting for 52 percent of U.S. mortgage originations—up from 9 percent in 2009—according to Inside Mortgage Finance. Six of the 10 largest U.S. mortgage lenders today are nonbanks.
Larger banks have been pulling away from the general mortgage market and have placed a greater focus on consumers with more financial stability since the Great Recession. Nonbanks tend to focus on serving first-time buyers and moderate-income families. Nonbanks also tend to take short-term loans from other banks to fund their lending, and some industry analysts are concerned that these entities could overextend themselves—as many did a few years ago. “As long as the good times roll on, it’s fine,” Ed Pinto, co-director of the Center on Housing Markets and Finance at the American Enterprise Institute, told The Wall Street Journal. “But all I can say is, we’re in a boom, and you cannot keep going up like this forever.”
Quicken Loans has emerged as the largest nonbank. The top mortgage lenders, by originations, for the first half of 2018 are:
- Wells Fargo
- JPMorgan Chase
- Quicken Loans
- Bank of America
- U.S. Bank
- United Wholesale
- Freedom Mortgage