Right now, big banks are hesitant to do business, but that doesn’t mean that the mortgage business will stop working. When the big banks steps aside, the smaller mortgage lenders step in, and right now we are seeing a huge boom of smaller lending. The third quarter of this year, the smaller companies held a 60% market share. That is almost a double increase from the 2009 numbers, when they only held 39% of the market share. That is simply because there is a need for mortgages, but many of the larger lenders are making policies that restrict lending, and not offering as many loans. Also, they may be charging higher rates to try to offset some of the risk.
In the third quarter, which are any lenders that are not the top five mortgage companies, rose about 6 percent in terms of market share. This comes from FBR Capital Markets analyst Paul Miller. This means that loan companies and regional banks have opportunities to provide mortgages, where it might have gone to other, larger lenders previously. Some smaller lenders have even sold shares in IPOs to try to become one of these lenders. The standards are still more strict with both small, medium and the largest mortgage companies, but the smaller and medium sized ones are still growing.
The big five mortgage lenders have changed the standards so that they are not providing credit like they used to and even if they are going to approve a loan, it takes longer than it used to. However, smaller mortgage companies can get to know their customers and can make decisions on an individual basis, rather than one that is based upon a computer score and a credit report. “You have more lenders offering mortgage products at a localized basis,” said Guy Cecala, CEO of Inside Mortgage Finance. “Instead of having to go to Wells Fargo now you’ve got every one of your community lenders and you can compare on pricing and on underwriting.”