Mortgage Lending’s Power Shift: Why Banks Are Poised to Take Back Business
Over the past 15 years, the mortgage lending landscape has completely flipped. In 2010, depository institutions originated 81% of all U.S. mortgages. By 2023, that number had cratered to just 17%, as independent mortgage banks (IMBs) dominated the space. Industry giants like Rocket, UWM, PennyMac, CrossCountry, Freedom, NewRez, and Fairway built massive market share by capitalizing on tech-driven efficiency, aggressive pricing, and a laser focus on mortgage lending.
But don’t expect that to last forever. A major shift is coming, and banks are positioning themselves for a comeback.
Why Depositories Are Poised to Reclaim Market Share
🏦 Regulatory Relief Is on the HorizonFor years, Basel III and Dodd-Frank regulations forced banks to hold higher capital reserves against mortgage loans, making them less profitable. With potential regulatory rollbacks and evolving capital requirements, banks could find mortgage lending more attractive again.
📉 A Purchase-Driven Market Plays to Banks' StrengthsIMBs thrived in the refinance boom, but as refis disappear, purchase lending takes center stage. Banks and credit unions excel at relationship-based lending - jumbo loans, first-time buyers, portfolio products, and construction loans - giving them a natural advantage.
🏗 Homebuilders Need Lending Partners With new home construction ramping up, builders want strong lender partnerships. Banks can leverage long-standing relationships with developers and offer construction-to-perm loans, filling a gap many IMBs struggle with.
📊 Rates Will Drop, Making Mortgage Lending Attractive Again The Fed’s aggressive rate hikes crushed lender margins and made mortgage servicing less appealing for banks. But as rates ease, expect banks to re-enter the space aggressively, taking advantage of improved profitability.
🤝 M&A and Joint Ventures Will Accelerate Rather than rebuild mortgage divisions from scratch, expect banks to buy or partner with IMBs. Joint ventures, correspondent relationships, and acquisitions will be key to banks scaling their mortgage presence efficiently.
For over a decade, IMBs have dominated with their speed, agility, and relentless mortgage focus. But banks and credit unions have deep pockets, broad customer relationships, and an ability to fund loans at lower costs.
The Big Question: Who Wins Round Two?
Do IMBs maintain their grip with tech and innovation, or will banks leverage their balance sheets and regulatory shifts to take back market share? The battle for the next mortgage cycle is just getting started.
