Largest U.S. Banks Grab A Bigger Share Of Shrinking Mortgage Origination Market

May 30th, 2017 by Trefis Team
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The 5 largest U.S. banks originated residential mortgages worth less than $111 billion in Q1 2017 – a figure which is considerably smaller than the $143 billion in first mortgages originated in the previous quarter. But these banks fared much better than the overall industry for the period – helping their combined market share increase from under 25% in Q3 2016 to almost 31% for Q1 2017.

CB_QA_MortgageOrig_17Q1

*Total U.S. Originations includes fresh mortgages as well as mortgage refinances as compiled by the Mortgage Bankers Association [1]

The mortgage industry in the U.S. witnessed a sharp reduction in origination volumes over the last two quarters, as a series of interest rate hikes by the Fed weighed on mortgage refinancing activity. With the number of fresh mortgage applications also remaining subdued, this resulted in total mortgage originations falling from $561 billion in Q3 2016 to $361 billion in Q1 2017 – a decline of more than 35%. As the largest U.S. banks received a bulk of these mortgage applications, their market share improved despite the fall in combined origination volume.

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CB_QA_MortgageOrigChange_17Q1

Wells Fargo has retained its position as the largest mortgage originator in the country from before the economic downturn. In fact, the bank tightened its grip in the industry after the recession thanks to its acquisition of Wachovia – originating one in every four mortgages in the country in early 2010. Although weak conditions in the mortgage space have dragged down Wells Fargo’s market share to just 11% for Q4 2015, the bank’s market share was largely around 12.5% over 2016, before it jumped to 16.3% in Q1 2017. Notably, this is the highest market share figure for Wells Fargo in the mortgage origination industry since Q3 2013.

You can see how changes to Wells Fargo’s mortgage origination volumes affect our price estimate for the bank by making changes to the chart below.

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Notes:
  1. MBA Quarterly Origination Estimates, MBA.org [↩]