Which U.S. Bank Is The Largest Holder Of Mortgage-Backed Securities?

by Trefis Team
Bank of America
Rate   |   votes   |   Share

Trefis highlights How Mortgage-Backed Securities Held By Major U.S. Banks Have Changed Since The Recession and finds that Bank of America holds the largest portfolio of mortgage-backed securities (MBS) among all commercial banks in the country. While there is sizable difference in how the portfolio of these once-reviled securities have changed for individual banks, the proportion of total MBS held by the 5 largest U.S. banks has steadily declined since the downturn.

What is a Mortgage-Backed Security and why it is important?

  • A mortgage-backed security (MBS) is a type of asset-backed security similar to a bond that is made up of a bundle of home loans bought from the banks/agencies that issued them.
  • Investors in MBS receive periodic payments similar to bond coupon payments.
  • Government-backed agencies, federal banks, and private issuers can issue and guarantee MBSs.
  • However, mortgage-backed security is only as good as the underlying mortgages.

Understanding How The Mortgage-Backed Securities Market Has Evolved After The Crisis:

#1. Total Mortgage-Backed Securities (MBS) In The U.S. Have Been On The Rise Since 2013

  • Total MBSs issued across all markets in the US shrank for 5 consecutive years after the economic downturn of 2008 but has been seeing steady growth over the last 5 years.
  • This metric stood at $9.4 trillion in 2007 and now stands at $9.7 trillion-an increase of just around 4%.
  • However, we believe stricter regulations and keen oversight by the government has kept the growth of MBSs in check.

#2. Notably, the Share Of 5 Major US Commercial Banks Has Seen A Steady Decline Since 2009

  • Total MBSs held by the 5 major commercial banks have gone up from $393 billion in 2007 to around $688 billion.
  • Despite an increase in the dollar value, the share of these banks in MBS held by commercial banks has gone down from almost 63% in 2009 to less than 37% in 2018.

Below we take a look at how the contribution of each US bank has changed since the crisis:

Bank Of America Remains The Largest Holder Of MBSs, With Almost $350 Billion In These Securities On Its Balance Sheet

  • Bank of America’s MBS portfolio shot up in 2008, increasing from around $163 billion to more than $230 billion thanks to its acquisition of Merrill Lynch.
  • This metric has gradually increased since then, increasing from $234 billion in 2009 to more than $340 billion in 2018.
  • BAC holds around 18% of the total MBS across U.S. commercial banks.

Wells Fargo’s MBS Portfolio Has Grew Steadily For Years Since The Recession, But Has Shrunk Over The Last Couple Of Years

  • Wells Fargo’s MBSs value shot up in 2008, increasing from just around $55 billion to almost $100 billion due to the bank’s acquisition of Wachovia.
  • This figure reached a peak level of $178 billion in 2016 before shrinking over the last couple of years to settle at $160 billion in 2018 – something that can be attributed to the Fed’s enforcement order restricting the bank’s ability to grow its balance sheet

JPMorgan’s Mortgage-Backed-Securities Balance Has Steadily Declined After Crisis

  • JP Morgan’s MBS’s value was at a peak level of$187 billion in 2009 but since then it has declined steadily.
  • Moreover, JPMorgan’s share of Commercial Banks’ MBS has fallen from 19% in 2009 to just 6% now.

Additional details regarding how MBSs held by Goldman Sachs and Citigroup have trended over the years are available are in our interactive dashboard.


Conclusion: Stake of major banks has steadily declined after the crisis

  • MBSs held by 3 of the 5 largest U.S. commercial banks has declined steadily since the crisis.
  • As of 2018, Bank of American accounted for half of the total mortgage-backed securities held by the 5 major banks.
  • Notably, though, the share of each bank in the MBS portfolio of Commercial Banks has declined.
  • Although the largest commercial banks have reduced their stake in the MBS market, other banks and private issuers are more than making up for the decline in MBSs held by the major banks as the housing market is growing at a steady pace in the U.S.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.

Rate   |   votes   |   Share


Name (Required)
Email (Required, but never displayed)
Be the first to comment!