“The short answer is the banks are becoming too conservative and now they’re gun-shy,” John Councilman, president of NAMB, told MPA. “The banks are becoming more credit sensitive, they don’t offer the product variety, and they aren’t reaching all areas and all people.”
A number of the nation’s big banks have also been saddled with various settlements for foreclosure violations and mishandling mortgages prior to the recession, including a $25 billion settlement reached between the government and a number of large big bank players.
And it seems they are giving up market share to smaller lenders as a result.
According to Inside Mortgage Finance data, obtained by Bloomberg, four of the top 10 mortgage originators in Q1 2015 weren’t banks – and they accounted for 37.5 percent of loans placed in 2014, a 26.7 percent increase over prior year.
"That was attributable to a combination of nonbanks being more aggressive, both in terms of rates and underwriting, and large banks pulling back slightly in the conforming markets," Editor Guy Cecala told CNBC.
One industry player believes another reason smaller lenders are gobbling up market share is due to the leanness of their business model and the fact that they are more plugged in to various housing markets.
“Smaller lenders are just more visible; real estate is local and having relationships with local agents makes a difference,” Robert Poe, senior vice president of Inwood National Bank told MPA. “The time it takes for big banks to get deals done – because of the bureaucracy -- hurts them.”
Smaller lenders are enjoying a better recovery following the housing market downturn than their big bank counterparts, and industry players are pointing to a number of reasons for the phenomena.