Fitch Ratings-New York/Chicago-03 November 2021: The near-term operating outlook for Fitch-rated U.S. non-bank mortgage companies is negative, given declining origination volumes, continued pressure on gain-on-sale (GOS) margins and increasing regulatory scrutiny, Fitch Ratings says. Rising rates fueled by the tapering of Fed asset purchases and home price appreciation from the growing disparity between housing supply and burgeoning demand are also expected to contribute to lower volumes and margins into 2022. The effect of the environment on ratings, while negative, is differentiated across issuers. Large-scale originators should remain profitable, but a challenging operating environment could force consolidation among smaller companies.

Non-bank mortgage companies have grown rapidly since the global financial crisis and now represent eight of the top 10 mortgage lenders and servicers in the U.S. However, most have relatively short operating histories, with the pandemic the first rate/credit cycle for many issuers.

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