The world of mortgage servicers is increasingly shifting away from traditional banks and towards non-bank entities

According to a recent analysis by the Consumer Financial Protection Bureau (CFPB), non-bank mortgage share is now over 60%, up from 44% in 2012. The CFPB reviewed Home Mortgage Disclosure Act (HMDA) data to make this determination.

Non-bank entities are generally more efficient than traditional banks in terms of loan processing time and cost. As such, the shift towards non-bank mortgage servicers could potentially result in longer terms, lower interests rates, and more competitive products for consumers. Additionally, the CFPB analysis indicated that non-bank mortgage origination volume has also risen substantially since 2012, when it made up 21% of all new mortgage originations.

The CFPB’s report provides insight into the ongoing evolution of the mortgage market and how non-banks are now dominating it. The agency noted that there was significant growth in the non-bank sector between 2014 and 2017. This represents a marked shift away from traditional banks, which had historically been the major players in the mortgage market. The CFPB attributed this trend in part to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which provided additional regulation and oversight for financial institutions.

In addition, the CFPB noted that non-bank servicers generally employ larger staffs and dedicate more resources to the customer experience compared to traditional banks. They also provide more flexible loan options, allowing consumers to tailor their loan package to meet their needs. Non-bank entities are generally smaller and more agile than their brick and mortar counterparts, offering both more competitive rates and better customer service.

The CFPB’s analysis provides evidence that non-bank financial entities are a growing presence in the mortgage market and now account for over 60% of all mortgages services. This shift has been driven in part by the increased regulation and oversight of traditional banks due to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Additionally, non-bank entities generally offer more flexible loan packages, more competitive rates, and larger staffs that are committed to providing superior customer service. This has resulted in a more level playing field, allowing borrowers to access better deals and services.

The CFPB’s findings shed light on the changing landscape of the mortgage market. Non-banks have become a driving force in the industry, offering consumers more choice and better deals than ever before. With the current regulatory environment continuing to favor these entities, it is likely that non-bank mortgage share will only increase moving forward. By doing their part to ensure a fair and balanced market, both banks and non-banks will benefit from a more competitive mortgage market that puts the consumer first.

This article was contributed on Aug 21, 2023