BofA and Countrywide

Bank of America has completed this transaction that makes them the largest mortgage lender in the country with a market share estimated at between 20% and 25%. That makes them a force to be reckoned with, the proverbial 800 pound gorilla.  What does this portend for the future of the mortgage business?

When I got into the mortgage business in 1980 the market was dominated by local Savings & Loan Associations.  The rise in interest rates resulted in most of them being absorbed by others or being taken over by the RTC, the Resolution Trust Corporation. The result of that was that the taxpayers lost $500 billion loss in 1990 dollars, much more in today's money. There was a significant contraction of the industry and the pundits all said, "In a few years there will just be a few lenders."

Just the opposite happened as FannieMae and FreddieMac became the dominant players in the market. There was a huge expansion of the industry fueled first by the re-fi boom as people rolled out of ARMs they had gotten in the '80's into fixed rate loans which were reasonably priced for the first time in a decade.

All during the '90's there were a lot of mergers and acquisitions and the call went out again, "In a few years there will just be a few lenders." But at the same time new mortgage companies were being created.  It got even more heated when we got into the post-dot com era and the Fed lowered rates dramatically.

The mortgage business expanded dramatically with record volume. The mortgage industry added more jobs than the rest of the economy in this period. Among the new lenders were those that were doing subprime loans. Of course, they are all gone now. 266 lenders have failed according to the Implode-O-Meter.

Existing big lenders have absorbed many of those lenders including, most obviously, the subject of this article. Again, the call is, "In a few years there will just be a few lenders."

This time, they may be right. I looked at loan statistics for my market and found that just seven lenders accounted for 50% of the market. I strongly suspect that many of the companies in the other 50% of the market won't be here next year. Indeed, the number eight lender on the list, IndyMac Bank, looks like the next casualty. Well, maybe after 25 years the pundits will finally be right.

With this background in place, in the weeks ahead I will talk about what this means to consumers.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles. Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Comments

[Jim]

Great it's bad enough to deal with BoA credit card interest rates skyrocket for no reason, now they got a large chunk of the mortgage industry. As they say, the bigger they are, the harder they fall. I won't be doing business with BoA ever again in my lifetime.