The wholesale lender channel continues to gain ground as the pandemic spurs an increase in borrowing
The wholesale lender channel continued gain ground in 2021 as the pandemic spurred an increase in mortgage borrowing, according to recent Home Mortgage Disclosure Act (HMDA) data.
Below, we take a closer look at the wholesale lender market and reveal the largest wholesale lenders in the country in 2021.
What are wholesale mortgage lenders?
Mortgage loans can be made through retail and wholesale channels. Most homebuyers are familiar with retail mortgages, where loans come from a lender and are managed within the same financial institution.
Think of retail lending as your typical mortgage where you submit your application, get approved, and pay at the same bank.
By contrast, wholesale lenders do not transact directly with clients. They offer mortgages through authorized third parties – such as banks, credit unions, and mortgage brokers. Lenders lay out the terms of the mortgage while brokers match borrowers to loans.
Read More: Wholesale lenders snap up market share
What are the pros and cons of wholesale mortgages?
Wholesale mortgages might be more easily accessible, particularly in areas where mortgage retailers are sparse. Additionally, mortgage brokers will often ask for looser lending requirements compared to loans processed in-house.
While it’s not a guarantee, wholesale loans may also be cheaper since mortgage brokers can match the lowest possible rate to each borrower’s financial situation.
However, using a third party to obtain loans may also entail additional fees. Borrowers can potentially end up paying more in the long run, despite the lower interest.
Transactions may also be slower at times, and some questions or concerns might not reach the lender.
What are loan origination and volume?
Loan origination is the multi-step process of obtaining a mortgage loan from a lender. It involves filing the application and required documents, screening, loan approval, and disbursal of funds.
Origination also refers to how many borrowers have obtained loans from the lenders, and it’s normally used to measure the latter’s performance. On the other hand, the volume refers to the total dollar value of all originations made.
The wholesale lenders in this list are ranked according to their total originations in 2020. The loan counts include mortgages made on one- to four-family properties.
The following rankings are based on MPA’s analysis of preliminary HMDA data and the lender’s annual reports if they are available.
1. Quicken Loans
Quicken retains the top spot by a large margin after originating more than 1.1 million loans totaling $320 billion in 2020. That’s a 121% increase in volume from 2019.
2. United Wholesale Mortgage
According to HMDA data, UWM closed 2020 with a total of 560,798 originations. This brings their production to $182 billion, 69% higher than the previous year’s record.
UWM’s volume is expected to rise further after 10,000 brokerages agreed to stop working with competitors Fairway Independent Mortgage and Quicken Loans.
3. Freedom Mortgage
Having originated 389,146 loans worth $99.2 billion in 2020, Freedom Mortgage increased its 2019 volume by almost 250%.
Among the top 10, Freedom has the lowest average loan amount of $255,000 and focuses on mortgages offered through the Department of Veterans Affairs and the Federal Housing Administration.
4. Wells Fargo
Wells Fargo originated 320,000 mortgages in 2020 with a total volume of around $137 billion.
The holding company doubled its 2019 volume by originating 294,467 loans in 2020, amounting to $105 billion.
6. JPMorgan Chase
Chase Home Lending increased its volume over the past year by 38% with 229,000 originations worth $108 billion. It also has the highest average loan amount of around $472,000 among the biggest wholesale lenders.
7. Caliber Home Loans
Caliber originated 228,600 loans worth around $70 billion in 2020, which is 70% higher than the previous year.
8. Fairway Independent Mortgage
The lender performed 73% better in 2020 than 2019 with 228,154 mortgages totaling $65 billion. However, UWM’s agreement addendum will likely affect Fairway’s volume this 2021.
9. Bank of America
BA originated around 184,000 loans in 2020 with a total value of $78 billion. The bank retained its rank from 2019, but it is the only lender in the group that generated fewer mortgages, decreasing by 7%.
10. US Bank
The banking giant originated around 180,000 loans in 2020 amounting to $59 billion.