JPMorgan, Wells Fargo lose share to small rivals JPMorgan With Wells Fargo Lose Share To Small Rivals

Bloomberg

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The two largest U.S. home lenders are feeling the bite of competition from smaller firms as mortgage originations tumble at the fastest rate since 2011.

New loans at Wells Fargo, the biggest, fell 38 percent to $50 billion in the fourth quarter from the third quarter, the bank said Tuesday in a statement. At JPMorgan Chase originations decreased 42 percent to $23.3 billion, outpacing the 27 percent fourth-quarter drop forecast by the Mortgage Bankers Association for the industry.

Big banks are facing dual challenges of increased competition and a plunge in home loan refinancing after the Federal Reserve said it planned to reduce monthly bond purchases and sent mortgage rates soaring. Smaller lenders are helped because the market is shifting to one led by mortgages for home purchases, favoring firms that can capture the buyers' attention, said Clifford Rossi, a former Citigroup risk manager who now teaches at the University of Maryland's Robert H. Smith School of Business.

"A lot of these guys are using the internet and social media platforms to reach borrowers more directly," Rossi said. Due to their "ability to be more nimble and opportunistic in the marketplace, you will see more companies like that be able to do more."

Wells Fargo and JPMorgan, ranked No. 1 and No. 2 by originations, accounted for about 28 percent of the market in the third quarter, according to Inside Mortgage Finance, a Bethesda, Maryland-based trade publication. The next 10 lenders accounted for roughly 26 percent.

Lost Share

Amy Bonitatibus, a JPMorgan spokeswoman, and Ancel Martinez, a spokesman at Wells Fargo, declined to comment.

Fourth-quarter figures suggest the two banks lost about 4 percent in market share, according to Kevin Barker, an analyst with Compass Point Research & Trading LLC. Meanwhile, PennyMac Mortgage Investment Trust, Ocwen Financial Corp. and NationStar Mortgage Holdings have increased business over the past year and could continue to gain share, he said.

"Some of the smaller lenders are offering better pricing, which helps capture more business," Barker said.

PennyMac was started in 2008 by a group of executives from Countrywide Financial Corp. The lender grew to become the ninth-biggest mortgage originator in the U.S. in the third quarter, according to Inside Mortgage Finance, originating $8.1 billion of home loans, or about 1.8 percent of the market.

Aggressive Pricing

Stanford Kurland, chief executive officer of PennyMac and former president of Countrywide, said in a November conference call that lenders have focused on strategies such as more aggressive pricing to increase market share.

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