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Bank of America, US Bancorp gain mortgage market share with digital offerings

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Bank of America, US Bancorp gain mortgage market share with digital offerings

The largest U.S. mortgage originators lost ground last year, but some lenders that have touted new digital platforms maintained or increased market share.

Among the four most active banking mortgage originators, Bank of America Corp. and U.S. Bancorp bucked the trend by gaining ground with market share increases of 26 basis points and 22 basis points, respectively, in 2018. By contrast, the top 20 mortgage originators, in aggregate, saw a 65 basis-point decline in market share, according to recently released Home Mortgage Disclosure Act data.

The HMDA data has a significant timing lag. Guy Cecala, publisher of Inside Mortgage Finance, a company that tracks origination activity, said the trends of 2018 persist.

"Everything that happened in 2018 has continued in 2019 in terms of the largest originators losing some market share," he said in an interview. "It might be slowing down, but it is continuing as the smaller nonbanks continue to pick up share."

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Bank of America has repeatedly highlighted its digital investments particularly in mortgage and in Erica, a virtual assistant — in earnings calls and investor days. In the company's second-quarter earnings call, Chairman and CEO Brian Moynihan said the bank had originated $3 billion worth of digital mortgages. He said the pace of origination had accelerated with the first $1 billion taking nearly a year to achieve, followed by eight weeks for the second billion and just six weeks for the third billion.

"What's really happening in digital mortgage, remember, is it's actually saving us a lot of money in the origination process as well as be a good client experience. And so you take that or take Erica, which is now moved to several million customers, you can see 50 million interactions first year, but each month, it's growing," Moynihan said.

In addition to the digital offering, Bank of America attributes its market share gains to more lending specialists in branches and competitive products that cater to low- and moderate-income borrowers, such as a 3% down payment mortgage, bank spokesperson Kris Yamamoto wrote in an email.

Jeffry von Gillern, vice chairman of technology and operations services for U.S. Bancorp, said at a November 2018 conference that 71% of the bank's retail mortgage customers complete the transaction, from end to end, on the bank's digital platform, which he said was rolled out in 2017. That lowered the bank's closing time for customers, with 30% of loans closed in less than 30 days and 20% in less than 20 days. It also reduced the workload for the company's mortgage loan officers in completing the transaction.

The other largest consumer banks lost market share. JPMorgan Chase & Co.'s market share slipped by 10 basis points, and Wells Fargo & Co. lost 70 basis points. Both banks have invested in their own digital offerings. Michael Weinbach, CEO of mortgage banking for JPMorgan, said at the bank's investor day in February that the bank's digital platform is cutting down closing times to the point that the company now guarantees a closing within three weeks or pays out $1,000.

Rather than falling behind digitally, it seems both banks have made conscious decisions to step back from the space. JPMorgan CEO Jamie Dimon has said post-crisis mortgage regulation has increased compliance cost burdens and has discouraged banks from being as active as they could be in the mortgage space.

"This has become a critical issue and one reason why banks have been moving away from significant parts of the mortgage business," Dimon wrote in the bank's most recent annual report.

Wells Fargo has been hamstrung by a regulatory enforcement action that limits its total assets. Further, executives said the bank had taken a step back in 2018 due to poor gain-on-sale margins, driven by a highly competitive market.

"Given the ongoing competitiveness in the mortgage market, we're focused on improving the customer experience and reducing cost," CFO John Shrewsberry said during an earnings call in January.

While Wells Fargo and JPMorgan have lost some ground, they remained the No. 1 and No. 3 mortgage originators, respectively, in the U.S. in 2018, representing no change from the previous year. The entire top four was unchanged year over year with Quicken Loans Inc. at No. 2 and Bank of America at No. 4. U.S. Bancorp moved up one spot in the rankings to No. 7.

The No. 5 spot changed hands from one nonbank to another with United Shore Financial Services LLC moving up from No. 7, taking the place of loanDepot.com LLC, which slipped one spot to No. 6.

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