U.S. Mortgage Share Is Now Top Heavy

US-Banks-Dominate-Mortgage-MarketThe three biggest lenders in the U.S. own a gigantic 55% share of the mortgage market.

That’s an incredible degree of concentration given that the U.S. has 6,498 banks. (By contrast, Canada has just 46 schedule I and II banks.)

In 2005, the top three lenders in the U.S. accounted for “only” 36% of market share, says MortgageDaily.com.

What happened in those five years?

Among other things, thousands of small lenders and brokers disappeared, due largely to heavy regulation, fewer funding sources and the elimination of broker channels by leading U.S. banks.

Top-US-Lenders-2010

Given that major banks now dominate the American market, we called on two U.S. lending contacts (a broker and a loan officer at a U.S. Bank) for perspective. They essentially told us the same thing in different ways—that American consumers have seen:

  • less competitive rates
  • mortgage options evaporate
  • approval requirements become extremely rigid
  • much slower underwriting and closing timeframes

And, it’s not over. Legislation due in April and the threatened withdrawal of government mortgage backing could shift even more market share to the major banks. From the looks of it, mortgage competition in the U.S. is alive, but not well.


Chart courtesy of MortgageDaily.com


Rob McLister, CMT

  1. Politicians have a habit of making knee-jerk regulations to cover their butts. The same thing is happening here with the new amortization and refinance rules.

  2. Wow. Did we forget about the housing meltdown in the US?
    >> less competitive rates
    Patently false. 30 year rates are down over 1% since the start of the meltdown.
    >> mortgage options evaporate
    Yeah. I too fondly remember those nice sub-prime options that used to be available. Whatever happened to those golden days of consumer choice?
    >> approval requirements become extremely rigid
    It is a tragedy that you need to actually have a down payment and a job to get a mortgage. What will all those ninjas do?
    >> much slower underwriting and closing timeframes
    Checking things is so last year. Get out that rubber stamp!
    Seriously this post is unbelievable. I know this site has bias, but presenting increased regulation and safeguards for the US market as some sort of harmful government interference? That takes the cake.

  3. LS,
    If you re-read the post you’ll notice that nowhere does it state that increased regulation was not warranted. The commentary was instead a statement about certain side effects of less competition and stiff regulation. More regulation was obviously needed to counter reckless underwriting and stabilize the U.S. market.
    Regarding rates, the reference was not to absolute rates, but rather the spread above funding costs. Less competition brings wider spreads (i.e. mortgage consumers pay more than they normally would, even if overall market funding costs decline).
    Per your second point, sub-prime loans are not the concern. The concern centres around the numerous traditional financing products that have also been impacted. FHA reflects this trend well. In 2005 FHA had a 5% share of the market. Today’s it’s an incredible 43% because so few alternative options exist. Even something as simple as pre-approvals are now harder to get.
    You have a long history of spiteful comments. You’d be a far greater contributor to the debates here if you engaged in a civil dialog whereby everyone can learn from each other and discuss viewpoints without malice.

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