Nonbank Lenders are Outpacing Traditional Banks
Americans took out more mortgages than ever before in 2020. Most of them didn’t come from banks.
Nonbank mortgage lenders in the U.S. issued 68.1% of all mortgages originated in 2020, up from 58.9% in 2019, according to industry research firm Inside Mortgage Finance. That is their highest market share on record and their biggest yearly gain since 2014.
Nonbank mortgage lenders have been gaining ground on banks for the past decade. These lenders, which don’t take deposits or offer other banking services, have made up more than half of the market since 2016. Seven of the 10 biggest U.S. mortgage lenders were nonbanks at the end of 2020, according to the research firm.
The coronavirus pandemic ushered in an era of cheap money that supercharged their growth. The average rate on the 30-year mortgage fell below 3% for the first time on record last year, boosting home sales and spurring a refinancing boom. Lenders of all stripes originated a record $3.83 trillion in home loans in 2020, according to the Mortgage Bankers Association.
But banks largely sat out the boom. Still smarting from massive losses on soured mortgages during the 2008-09 financial crisis, they shunned all but the safest borrowers and pulled back from the jumbo loans that had fueled their mortgage businesses in recent years. A surge in loan demand from corporate borrowers, meanwhile, strained their balance sheets.