The beginning of the year brings us the feeling of a fresh start and acknowledgment of some goals we keep forgetting along with ideas and plans what we want to focus on during the year such as getting the best refinance rates. So, when we think of the real estate market, we should be excited about the upcoming “traditional” spring boom. But will this year be like any other? Well, with the current COVID-19 pandemic and therefore an increasingly volatile financial system, this year will be probably everything but what the mortgage lending industry is used to.
Reasons for refinancing
Having in mind the decreasing mortgage rates, refinancing existing mortgages gave many borrowers a way to deal with the struggles of finding ways to generate fresh funds or new business. Mortgage refinancing was on the mind of many banks, financial service companies, and their nonbank rivals last year, both as the new business and as a way to help and understand the ones on the verge of possible economic difficulties. And let’s not forget that probably had some impact on resolving (or postponing) some possible non-performing loans.
How did main mortgage providers do?
The fourth quarter of 2020 was not the best for Wells Fargo & Company (NYSE: WFC) and its primary subsidiary Wells Fargo Bank, N.A. The second-biggest mortgage lender in the U.S continued with losing the position in the mortgage market to its nonbank rivals. With $53.94 billion originated in the Q4, this mortgage provider fell by 12.5% comparing to the previous quarter when it originated $61.6 billion in mortgages. Even when comparing to the same quarter of 2019, the Q4 of 2020 showed a decline. On the other hand, Wells Fargo’s main rival in deposits, JPMorgan Chase & Co. (NYSE: JPM) managed to originate $$32.5 billion in residential mortgages in the last quarter of 2020, which is a sequential gain of 12.5%.
What about the IMBs?
Both Wells Fargo and JPMorgan Chase are losing market share to their nonbank rivals like United Wholesale Mortgage (Gores Holdings IV, NASDAQ: GHIV) and Rocket Companies (NYSE: RKT). Neither UWM nor Rocket have released their Q4 results yet, but they are both expected to outperform Wells Fargo on originations. Rocket Companies originated 89 billion in mortgages in the third quarter, while UWM, which operates only in the wholesale mortgage, originated $54 billion in mortgages during the same quarter.
Conclusion
A recent analysis by Inside Mortgage Finance showed that at the end of 2020 independent mortgage banks (IMBs) were servicing around $4 trillion of outstanding agency mortgage-backed-securities. That means that IMBs hold around 56% of the servicing market, leaving the rest to their commercial banking rivals. To conclude, we can only add the fact that the refinancing mortgage business surpassed the new mortgage deals sometimes in Q4 2019, so it is clear that the IMBs are not to be taken lightly.
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