Lower rates and faster processing helps small banks compete

Biggest Mortgage Lenders

When almost all major banks scaled back on mortgage originations after the recession, other parties picked up the slack – shadow bankers began offering loans, peer-to-peer lending grew and credit unions found more customers than ever before. Another area that found itself, and continues to find itself, growing after the crisis is independent and community banks, Reuters showed.

Data shows that the industry as a whole flourished in 2008, with community banks collectively competing against the major banks that at one point ruled the market. In 2010, the five biggest mortgage lenders made up 66 percent of the market. By 2012, the number dropped to 53.2 percent. At this rate, it could be 40 percent by 2014.

There are a few reasons for the growth. Major banks were hesitant to lend to the low-income population, and Reuters found that currently, FHA loans, known for attracting low-income borrowers, make up a higher percentage of community banks’ balance sheets than major banks’. In addition, some small bank lenders realized that not only do customers want lower interest rates, but faster service too. Small banks that have not had the name-brand advantages of larger ones have been forced to provide better service to attract customers, and it’s paying off.

“When the big guys get backed up, they have a tendency to raise their price, to slow down volume.” Brian Hale, chief executive of Stearns Lending Inc. told the news source. “And that gives other lenders an opportunity, because the consumer thinks, ‘Why would I pay an extra $100 a month,'”

Major banks are beginning to increase the number of mortgages and other loans they offer, but independent banks still have a strong hold. And with technology – including application processing software to increase account acquisitions – providing extra support, both major and independent banks can give customers more convenience, and, with the increased profits, lower their interest rates.

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