Deconsolidation is better for the mortgage business than consolidation is. And just now, we are seeing deconsolidation on both sides of the mortgage ledger.
Servicing is rapidly deconsolidating as the top five no longer control more than half the market, while originations, which were consolidating after the crunch as tens of thousands left the mortgage broker business, have at least ceased consolidating.
Deconsolidation leads to more products and better service for consumers, competition that makes lenders and vendors sharper, and more people employed. Deconsolidation shows up in the latest numbers about a small player in the business that is rapidly increasing its share in both originations and servicing.
Credit unions, according to recent numbers put out by Callahan & Associates, have increased origination share from 2% in 2006 to 6.5% at the end of 2011. While it would be premature to peg them the new mortgage specialists, they do seem to be acting more and more like the thrift industry of old.
On the servicing side, credit unions now have 3.5% of all servicing ($310 billion out of $9.1 trillion). And if they want more, it is readily available both through retaining servicing on production or through purchases. It’s good to remember what a big tent the mortgage industry can be. Instead of just banks and mortgage banks, which are the biggest players, there is a whole array of other players, usually with their own niche in the industry.
Thrifts, for instance, never really went away and remain viable originators of mortgages. Insurance companies remain big players in both commercial mortgages and farm mortgages. Pension funds traditionally have had a healthy appetite for mortgage assets. The Rural Housing Service provides another federal mortgage beyond FHA and DVA.
And there are actually five secondary marketing agencies for mortgages, not just Fannie Mae, Freddie Mac and Ginnie Mae. The Farm Credit System provides money for farm mortgages and rural mortgages and secondary markets through Farmer Mac. The Federal Home Loan Banks are definitely a mortgage GSE. Finally, mortgage brokers, though greatly reduced, remain a functioning part of the system.
Take a look at auxiliary businesses, like realty agents, homebuilders, construction workers and home improvement retailing, and it’s easy to see how the mortgage business has been a healthy part of the American economy. And will be again.
