JPMorgan Chase and Wells Fargo might currently seem untouchable in the mortgage market, but new marketplace lenders might be threatening their share of the $1.45 trillion cake.
New Marketplace Lenders
The home loan market is seeing an insurgence of companies which offer refinancing and new loans across the board, entering the market in student debt, mortgages, as well as personal lending. These companies have the advantage of keeping the application process simple, online, and immediately responsive, unlike the sometimes painfully complicated procedures required by traditional banks.
Companies such as SoFi, On Deck Capital, and CommonBond, still have a ways to go to represent a real threat to the big players when it comes to their market share, but it would be a mistake to disregard the huge strides they are making in the market.
The mortgage market is huge, with volumes of over a trillion of dollars a year. In just the second quarter this year, loans totaling $395 billion were issued. Of that number, $62 billion were issued by Wells Fargo, just over $29 billion by JPMorgan, and close to $19 billion by Bank of America. However, despite the lion’s share still belonging to the bigger players, non-banks are seeing significant growth in the market share they cover. Their share of the market in 2014 climbed to 37.5 percent from 26.7 percent the year before.
One of the new players, SoFi, started its growth by refinancing government-backed student loans, but is now issuing close to $50 million worth of mortgages monthly. All of which can be grouped together and sold to Freddie Mac and Fannie Mae, when helped by bank credit lines. SoFi also has plans to further expand its issuance of such mortgages to $3 billion for next year, a number that is only poised to grow in the future and may, at some point, make the big players sit up and take note.