By Thomas G. Wolfe, J.D.
In issuing a July 2015 “Fact Sheet,” the Mortgage Bankers Association (MBA) presents an interesting portrait of the independent mortgage bankers’ market share of the origination of home-purchase mortgages in the United States over the last several years, despite their size in relation to other financial institutions.
For example, in its Fact Sheet, entitled “The Resurgent Role of the Independent Mortgage Bank,” the MBA states that, since 2008, independent mortgage bankers comprise about 12 percent of all entities required to report under the federal Home Mortgage Disclosure Act. Yet, despite their size in the marketplace, the independent mortgage bankers’ market share of the origination of home-purchase mortgages has increased “from 25 percent in 2008 to 40 percent in 2013.” Similarly, the MBA points out that independent mortgage bankers have originated 58 percent of all government-insured or government-guaranteed purchase mortgages in recent times.
In sketching the business model of an independent mortgage bank, the MBA’s Fact Sheet observes that independent mortgage banks are non-depository institutions that “typically borrow from various warehouse lenders to finance loans prior to their sale in the secondary market.” In addition, independent mortgage banks usually concentrate exclusively on providing home-mortgage financing, mortgage servicing, and other closely related services.
According to the MBA, most independent mortgage banks are privately held companies that are owned and operated by a single individual or a small number of people “whose personal net worth is fully invested in the company.” Consequently, these owners of independent mortgage banks almost always have “skin in the game” and have “strong incentives to manage the business for the long term,” the MBA emphasizes.
Further, the MBA’s Fact Sheet indicates that independent mortgage banks tend to focus much of their lending efforts on government-insured or government-guaranteed loans, which “predominantly serve low- and moderate-income families and first-time buyers.” These government-backed programs typically involve the Federal Housing Administration, Veterans Administration, or Rural Housing Service, among others, the MBA notes.
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