Community Banks and Local Thrifts Gain Residential Mortgage Market Share
During the housing boom days of the past five years, many community banks and thrifts struggled to compete with aggressive mortgage brokers and national lenders for residential mortgage loans. Now, it seems they are growing market share as some of those earlier rivals are scaling back or going out of business because of mortgage losses.
James R. Hagerty wrote recently in The Wall Street Journal that total U.S. home mortgage originations in the first quarter of 2008 dropped 29% to $480 billion, according to estimates he quoted from Inside Mortgage Finance, a trade publication. The top 10 U.S. mortgage lenders, mostly units of large national banks, accounted for 72% of loans originated in the first quarter, Inside Mortgage Finance reported. Still, the gains by community banks show that the giants are not keeping the market to themselves.
Joe Collins, vice president of residential mortgage, a division of TIB-The Independent BankersBank, Dallas, TX, told Bankers Digest the residential mortgage division has experienced remarkable loan volume growth from its correspondent community banks in its traditional mortgage program since the early part of 2007. He said the loan volume in April 2008 was double that of April 2007 and is up 40% since January 2008. He attributes the growth to several factors: community banks are experiencing stronger mortgage loan demand from their customers, many mortgage brokers are out of business, and Fannie Mae and Freddie Mac have increased mortgage loan program limits as a result of the Economic Stimulus Act of 2008 which became law in February 2008. (TIB offers its mortgage loan program to banks in TX, LA, MO, KS, OK, NM, and AZ; it does not market the program in CA.)
According to Hagerty’s article, Taylor, Bean & Whitaker Mortgage Corp., a national wholesale mortgage lender in Ocala, FL, has signed up more than 2,100 community banks to act as brokers for loans funded by Taylor, Bean. The article reported the company’s mortgage lending generated in the first four months of 2008 was up 31% from a year earlier. Taylor, Bean has offices in the Bankers Digest coverage area of AZ, NM, and TX, and other offices on the West Coast, Midwest and East Coast. The industry giants have not been totally asleep during the nationwide slump in mortgage lending. Top dog Bank of America Corp. CEO Kenneth Lewis recently said that BofA will control a 20% - 25% market share in the home loan market once its Countryside Financial Corp. deal is completed. Furthermore, Lewis said that percentage should grown once the housing crisis comes to an end. In a recent Associated Press article titled, “BofA CEO: No Plans to scuttle Countrywide deal.” Lewis said he believes that [in the future] it will be harder for small and medium-sized banks to compete with large financial institutions like Bank of America for the consumer mortgage business.
Another top 10 national bank mortgage servicer, First Horizon National Corp., Memphis, TN, has agreed to sell its residential mortgage origination (outside TN) and servicing business to deep-pocket MetLife Inc., which continues to grow in the mortgage business.
According to the OCC, in 2007 national banks originated about 45% percent of all home mortgages in the U.S. They also were servicers for about 44% of all U.S. mortgages. About 90% of the mortgages they service are held by third parties via securitization by Fannie Mae, Freddie Mac, and other financial institutions. National banks also hold a substantial amount of both mortgage securities and first mortgages on their balance sheets, which together total over $1.7 trillion.
Inside Mortgage Finance estimates Fannie Mae and Freddie Mac’s market share in the mortgage business at 68% for the first quarter of 2008 compared to about 40% for the first quarter of 2006. Stay tuned!
