Study: Large Banks Lag Behind Indie Lenders on Profits Per Mortgage Loan

Phil Hall

Jun 20, 2019

Photo credit: Getty Images/William_Potter

When it comes to making a profit on retail residential mortgages, the large banks can take a lesson from their independent rivals, according to new data from Stratmor Group.

According to the Greenwood Village, Colo.-based Stratmor Group, large banks lost $4,803 per retail mortgage loan originated in 2018 while large independent lenders which earned on average of $376 per loan. Large banks captured four percent of the available mortgage volume from their customer base last year, compared to 8.1 percent at regional banks, and the large banks recaptured only 12 percent of their own customers who paid off an existing mortgage while the large independents boasted a 30 percent retention rate.

Principal Tom Finnegan explained the disparity by noting the large banks’ strategies in the mortgage space were off the mark.

“Portfolio loans, and jumbo loans specifically, are being priced aggressively by the banks, leading to imputed revenue that is lower than might be expected otherwise,” he said, adding that large banks also mostly jettisoned FHA and VA lending, which the independents used to their advantage. “Because FHA and VA loans typically offer the ability to price with wider margins, not participating in this loan segment can also contribute to lower per loan revenue.”

Furthermore, Finnegan faulted the large banks for not responding quickly to changing market trends, especially in the recent dominance of purchase mortgages over refinances.

“When our industry becomes dominated by purchase money mortgages, the large banks' natural advantage in terms of new loan opportunities dissipates,” Finnegan said.

Link copied

Published

Jun 20, 2019

Analysis and Data

Mortgage Rates And Home Prices Soar, Leaving Homebuyers In Limbo

Redfin report highlights slump in sales, yet a glimmer of hope as new listings tick up.

As mortgage rates hover near their highest in two decades, a new report by Redfin reveals that U.S. home prices have climbed 3% year over year in the month leading to Sept. 17. Consequently, the typical monthly housing payment for Americans has surged to unprecedented levels...

Analysis and Data

Rising Mortgage Rates Drive Borrowers To Buydown Points

Western states lead in adoption as homeowners seek short-term relief.

With the average 30-year, fixed-rate mortgage hitting a 21-year peak in August, homeowners face added affordability challenges, as reported by Freddie Mac. In response, some borrowers are turning to mortgage buydown points as a strategy to temporarily lower monthly payments,...

Oct

Colorado Mortgage Summit

Denver, CO

More from

Industry News

CFPB Issues Guidance On AI In Credit Underwriting

Creditors must provide specific and accurate reasons for credit denials, even with complex AI models.

Industry News

Sep 19, 2023

Intercontinental Exchange Completes Black Knight Acquisition; Births Dark Matter Technologies Under Constellation Software

Rich Gagliano takes the helm at Dark Matter Technologies, poised to lead the future of Empower LOS with a 1,300-strong team, blending startup agility with decades of industry experience.

Industry News

Sep 18, 2023

FHFA Invites Public Engagement On Modernized Credit Score Transition

Stakeholder forums and listening sessions planned to ensure seamless rollout; extended timeline for bi-merge credit report requirement in play.

Industry News

Sep 11, 2023

Desperation Drives Difficulty in Closing Mortgages in California

Analysis reveals California among top 20 toughest states for mortgage closures.

Industry News

Sep 11, 2023

If You Build It, They Will Come

Ratings will go a long way toward growing the market for home equity-backed securities