Banks gain major ground in mortgage market share, but nonbanks still lead

Nonbanks held onto their mortgage lending market share lead in 2022, but commercial banks gained ground even amid a slump in originations.

Funded mortgage loans fell more than 40.6% from 2021 to $2.840 trillion in 2022, according to S&P Global Market Intelligence data based on recently released Home Mortgage Disclosure Act information. Refinancing activity faced an even harder year, falling 72.8% from 2021 levels, according to the Consumer Financial Protection Bureau. The steep decline in volume was driven by the Federal Reserve's rapid interest rate hikes that began in 2022.

While the majority of mortgage lenders saw steep drop-offs in lending activity, banks gained ground last year, knocking some nonbank lenders down the list of the top 20 lenders and taking a larger share of funded originations. Some banks even posted year-over-year increases in mortgage lending.

Banks gain ground, but nonbanks still have the edge

Banks and thrifts represented nine of the top 20 lenders in 2022, a slight increase from seven the year before. Additionally, six of the top 10 spots went to banks, compared to just three in 2021.

Across the top 20, nonbanks had an 18.9% share of funded originations, compared with 14.2% for banks, an 11.4-percentage-point shift in favor of commercial banks compared to 2021.

Wells Fargo & Co. unit Wells Fargo Bank NA remained in the third spot. However, the company recently announced plans to scale down its mortgage business and exit its exiting correspondent home lending in January.

Rocket Mortgage LLC, a unit of Rocket Cos. Inc., and UWM Holdings Corp. again held the top two spots. Although Wells Fargo Bank reported a 50.4% decrease in funded loans year over year, less than the 43.8% decline UWM Holdings posted, the bank saw less pressure than Rocket, which posted the third-largest decrease in funded loans among the top 20 at 62.5%.

JPMorgan Chase & Co. unit JPMorgan Chase Bank NA reclaimed fourth place, overtaking loanDepot Inc. unit loanDepot.com LLC, which posted a 61.6% decline in funded loans year over year and fell to sixth place behind Bank of America Corp. unit Bank of America NA.

Two commercial banks, First Republic Bank and PNC Bank NA, managed to achieve year-over-year increases in funded loans at 17.3% and 7.3%, respectively, despite the decline in mortgage volumes, though First Republic ultimately failed at the beginning of May this year.

Home Point Capital Inc. unit Home Point Financial Corp. reported the largest year-over-year decrease in funded loans at 68.9%, followed by PennyMac Financial Services Inc. unit PennyMac Loan Services LLC, which reported a decline of 63.1%.

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Mortgage market remains challenging

As the mortgage market remains challenged, some lenders are laying off staff and pulling back from the lending segment. The mortgage market's recovery is likely to be slow according to the Mortgage Bankers Association's (MBA) June forecast.

The MBA expects total one- to four-family mortgage originations to fall by 20.3% from 2022 levels. Refinance activity will also remain under pressure this year, with the MBA projecting a 41.4% drop year over year.

Furthermore, the MBA does not expect annual mortgage originations to exceed 2022 levels until 2025.