It is a tale of two cities, the mortgage lenders with the most assets in 2015 compared to those in the smallest asset group. In my last blog I looked at the 107 lenders with more than $10 billion in assets. They made more than half a trillion dollars in home loans during that year, for an average of almost $550 million apiece. But for those that had less than $275 million in assets, it was a totally different story.
It was a much larger class, to start, 3,274 institutions. They made $64 billion in mortgages, according to Home Mortgage Disclose Act data analyzed by LendingPatterns™. That’s an average of about $20 million apiece. The number of mortgages came to 381,000, compared to the biggest lenders’1.8 million.
The smallest lenders did not share the biggest lenders’ appetite for jumbo mortgages. Just 19 percent of their production went to jumbo dollars, compared to the biggest lenders at 55 percent.
Just 38 percent of the smallest group’s mortgages were put into portfolio, compared to 60 percent that stayed on biggest lender balance sheets. Non-agency investors had the most interest in mortgages made by lenders with less than $275 million in assets, at 45 percent. Freddie Mae edged out Fannie Mae for the biggest agency investor, at 7.6 percent of dollars.
Upper-income borrowers dominated the biggest-size batch of lenders, with 63 percent of all loan dollars going to this cohort. Low-income borrowers, in contrast, got less than two percent of the funding. The smallest mortgage lenders weren’t too far different here, with 53 percent of dollars going to upper income borrowers and a little more than three percent to low-income borrowers.
First-lien loans for the smallest lender group averaged $184,000 apiece, compared to $340,000 for lenders with more than $10 billion in assets, and subordinate liens averaged $52,000 compared to $115,000 for the largest asset size group.
Lending was dominated by whites at those institutions with less than $275 million in assets. They got 73 percent of all dollars, with minority groups claiming 12.7 percent. In the largest asset class, whites got more than 57 percent of all loans, with minorities taking 17 percent.
The smallest asset class made a higher percentage of “guvvie” mortgages. Conventional mortgages accounted for 81 percent of mortgage dollars, with government-insured loans at 19 percent. Conventional loans for the biggest asset class lenders came to 92 percent.
Spreads came in at 2.71 percent for first liens and 5.22 percent for subordinate liens at lenders with less than $275 million in assets. These were a good bit higher than spreads for the $10 billion and above asset class, where they were 1.89 percent and 4.63 percent, respectively.
The smallest asset class lenders tilted a little more to purchase money, at 54 percent, with 42 percent refinancings. Loan purpose split fairly evenly for the biggest asset lenders: 49 percent was purchase mortgage money, 46 percent went for refis, and five percent of the finance went for home improvement loans.
(Mark Fogarty is a journalist and analyst who has been covering the mortgage industry for more than 30 years.)