Homebuyers increasingly turn to independent mortgage companies for their loans, rather than traditional banks.
According to data from the Federal Reserve, nondepository independent mortgage companies originated 47 percent of completed home-purchase loans in 2014 and 42 percent of refinance loans – up from 43 percent and 31 percent from 2013. That also represents the largest share of the mortgage market held by nonbanks since 1995.
Nonbanks lenders include companies like Quicken Loans, Loan Depot and Finance of America Holdings. Blackstone’s Group Finance of America Holdings is expected to soon become one of the nation’s largest nonbank lenders after recently acquiring Gateway Funding Diversified Mortgage Services, Pinnacle Capital Mortgage and some assets and operations of PMAC Lending Services Inc.
The largest majority of nonbank mortgage volume still comes from conforming mortgages, backed by Fannie Mae, Freddie Mac and the Federal Housing Administration. However, nonbank lenders are also trying to increase their market share of jumbo loans.
Quicken Loans, for example, is allowing some jumbo mortgage borrowers with consistent income documentation to complete their transaction fully online.
Some nonbank lenders are touting their speed as an advantage over traditional banks. For instance, company officials with Movement Mortgage, tell conforming loan borrowers that they are able to close mortgages in seven business days and jumbo borrowers in only a few days more – even with new mortgage disclosure rules that took effect last month.
While nonbank lending is catching on, bank officials say they hold one big advantage : They tend to be able to offer lower rates and closing costs to customers based on length of account history and amount of holdings.
