The Nonbanks Strike Back! Origination Shares Continue To Rise (As FICO Falls)

Regulatory oversight from the Consumer Financial Protection Bureau (CFPB) is making it more problematic for large banks to continue in the residential mortgage space (more regs, rules and paperwork). In addition, banks consolidated during the financial crisis to the point where they are so well-diversified that revenue stream from mortgages is not part of their headline strategy.

All of which results in the downwind of big banks in the residential mortgage space and the rise of the nonbank originators.

mortgshatre
Source: AEI

At the same time, credit scores for closed loans have been dropping.

FICOMBAP
Source: Ellie Mae and Mortgage Bankers Association

Shrinking large bank originations and increasing nonbank shares of the residential mortgage market. Sounds bit like the last decade before the financial crisis. Let’s hope that the financial regulators are watching the credit quality and performance carefully for nonbank originators this time around.

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