FDIC QUARTERLY
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TRENDS IN MORTGAGE ORIGINATION AND SERVICING:
Nonbanks in the Post-Crisis Period
1
For this article, the financial crisis period is defined throughout as 2008 through 2009, corresponding roughly to the most acute
phase of the financial crisis. The FDIC has referred to the broader banking crisis as extending through 2013. See FDIC, Crisis and
Response: An FDIC History, 2008–2013 (2017), https://www.fdic.gov/bank/historical/crisis/.
2
Home equity loans and home equity lines of credit are included in 1–4 family mortgages outstanding.
3
Board of Governors of the Federal Reserve System, “Z.1 Financial Accounts of the United States, Second Quarter 2019,”
https://www.federalreserve.gov/releases/z1/20190920/z1.pdf, L.218.
4
Private-label issuance is 5.2 percent of all residential mortgage-backed securitization issuance, down from more than 50 percent
in 2005 and 2006, and the 1995 to 2003 share of near 20 percent, according to the Urban Institute, “Housing Finance at a Glance,”
August 2019:12, https://www.urban.org/sites/default/files/publication/100866/august_chartbook_2019_0.pdf.
5
According to the Urban Institute’s July 2019 edition of “Housing Finance at a Glance,” of all first-lien originations in first
quarter 2019, 39.6 percent were GSE securitizations, 37.3 percent were portfolio originations, 20.2 percent were Federal Housing
Administration (FHA) or Department of Veterans Affairs (VA) securitizations, and 2.9 percent were private-label securitizations.
The percentage of private-label securitizations was the highest since 2007, but a small fraction of the private-label share in the
years leading up to the crisis. https://www.urban.org/sites/default/files/publication/100723/july_chartbook_2019_1.pdf.
6
Ben S. Bernanke, “Housing, Housing Finance, and Monetary Policy,” speech at the Federal Reserve Bank of Kansas City
Economic Symposium, Jackson Hole, Wyoming, August 31, 2007, https://www.federalreserve.gov/newsevents/speech/
bernanke20070831a.htm; and Marshall Lux and Robert Greene, “What’s Behind the Non-Bank Mortgage Boom?” Harvard
Kennedy School, June 2015:5, https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/working.papers/42_Nonbank_
Boom_Lux_Greene.pdf.
Introduction The mortgage market changed notably after the collapse of the U.S. housing market in
2007 and the financial crisis that followed. A substantive share of mortgage origination and
servicing, and some of the risk associated with these activities, migrated outside of the bank-
ing system. Some risk remains with banks or could be transmitted to banks through other
channels, including bank lending to nonbank mortgage lenders and servicers.
1
Changing
mortgage market dynamics and new risks and uncertainties warrant investigation of poten-
tial implications for systemic risk.
This article covers trends in the volume of 1–4 family mortgages outstanding, migration
of mortgages between market participants, and the drivers of these shifts. Next, the article
discusses trends in residential mortgage origination and servicing from 2000 to early 2019
and discusses the landscape of the mortgage industry, key characteristics of nonbank origi-
nators and servicers, and the potential risks posed by nonbanks. Last, the article contem-
plates the implications that the migration of mortgage activities to nonbanks may have for
banks and the financial system.
Trends in the Volume of and
Competition for 1–4 Family
Home Mortgage Loans
Mortgage originators and servicers have long competed for market share through innova-
tions in capital markets, customer service, and funding and business structures, and in
applying technology to make processes more efficient and cost-effective. The composition
and the concentration of the dominant market participants have varied with developments
in regulation, government intervention and guarantees, primary and secondary mortgage
markets, securitization, technological innovation, dynamics in housing markets, financial
markets, and the broader economy.
The share of 1–4 family mortgages outstanding held by banks has declined since the late
1970s as mortgages held by the government-sponsored enterprises (GSEs) and mortgages in
agency- and GSE-backed mortgage pools became an increasingly dominant part of the U.S.
mortgage market (Chart 1).
2
The share of mortgages outstanding held by banks declined
from the 1970s through the 1990s and then leveled off near 24percent in the past decade.
3
The bank share of mortgages held by non-GSE entities declined through 2007 to 46percent,
then rebounded to nearly 64percent in 2019. This decline and recovery was largely driven
by the rise and fall of private-label mortgage-backed securitization.
4
These historical shifts
in outstanding mortgage volumes were largely driven by securitization trends and a robust
secondary market for mortgages.
5
Insolvency in thrifts in the early 1980s and the savings and loan crisis of the late 1980s
contributed significantly to the decline in bank market share. These events in the 1980s
ended the dominance of deposit-taking portfolio lenders in the mortgage markets, leaving
mortgage lending largely to growing regional banks and a growing number of nonbanks.
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