Mortgage Banking

Mortgage Banking

Brief Excerpt from Industry Overview Chapter:

Companies in this industry lend money with real estate as collateral. Major companies based in the US include units of Bank of America, JPMorgan Chase, Rocket Mortgage, and Wells Fargo; other major companies include units of Barclays and Nationwide Building Society (both based in the UK), BNP Paribas (France), and Deutsche Bank and Postbank (both based in Germany).

COMPETITIVE LANDSCAPE

Demand for mortgage services is driven by home sales and the refinancing that occurs when mortgage rates are low. The profitability of individual companies depends on volume, interest rate spreads, and efficient operations. Large companies have big economies of scale in operations. Small companies compete successfully by funneling mortgages to the large companies. The US industry is concentrated: the eight largest companies generate about 40% of revenue.

PRODUCTS, OPERATIONS & TECHNOLOGY

Mortgage banks lend money to homeowners with the home as collateral; some specialize in lending to farms or businesses, also with real estate as collateral. Main revenue sources include loans to non-financial businesses which account for more than 40% of the industry revenue, other revenue sources include other secured or guaranteed home loans (about 20%), home equity loans (more than 15%), unsecured loans to consumers (10%), loans to financial businesses (10%), and guaranteed home loans (5%).