What percentage of your clients submits loan applications to local, community banks?
- Less than 25%. (72%, 23 Votes)
- 25%-50%. (13%, 4 Votes)
- 50%-75%. (9%, 3 Votes)
- 75%-100%. (6%, 2 Votes)
Total Voters: 32
Bank of America (BofA) has sold the servicing rights to two million loans it serviced. The sale reduces their loan servicing business by 20%, or $306 billion. The servicing rights were sold to several specialty mortgage-servicing firms.
BofA will use the sale proceeds to pay its $10 billion settlement with Fannie Mae.
BofA’s mortgage market share has shrunk to 4% — a big step down from 20% in 2009. As BofA reduces its participation in the mortgage market, other Big Banks like Wells Fargo (controlling 30% of mortgages) and JPMorgan (controlling 10%) continue to grow. This reduces competition among Big Banks, which is ultimately a detriment to homebuyers.
first tuesday insight
The Big Three already felt like a monopoly. As BofA steadily reduces its mortgage market share, JPMorgan and Wells Fargo will only gain steam. No other competitors even come close.
As competition between Big Banks decreases, the inevitable result is higher rates and poorer customer service. What’s a homebuyer to do?
Buyers needing purchase-assist financing and owners looking to refinance need to be told to turn to small, local banks. These banks still have to compete for clients.
Unfortunately, small banks with low levels of mortgage originations are often unable to contend with the low rates offered by high volume Big Banks. (This may change if banks like Wells Fargo raise their rates due to lack of competition).
However, small banks by-and-large excel at customer service, a merit unknown to Big Banks. Suggest that your homebuyer clients submit loan applications to both a small and a large bank — they will likely be most pleasantly surprised.
Re: In Deal, Bank of America Extends Retreat From Mortgages from The New York Times