Mortgage Banking Industry Overview

Excerpt from Mortgage Banking Report

Companies in this industry lend money with real estate as collateral. Major companies include units of Wells Fargo, JPMorgan Chase, Citigroup, and Bank of America (all based in the US), as well as units of Barclays Bank (UK), BNP Paribas (France), and Deutsche Bank (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 industry is concentrated: the largest 50 companies generate about 70 percent of revenue.

Products, Operations & Technology

Mortgage banks lend money to homeowners through a mortgage, with the home as collateral. The traditional mortgage has a fixed interest rate and level monthly payments that pay off the loan over 30 years, but loans with adjustable interest rates (ARMs) and variable payment schedules have also become common. Low interest rates and easy credit led mortgage banks to offer ARMs at subprime rates to buyers who did not qualify for traditional mortgages. When home prices dropped and buyers defaulted on their loans, ARMs lost favor in the late 2000s.