When the refi tsunami began to lose steam in late 2003 mortgage bankers thought they were in for a difficult year ahead. But then rates began to fall in early 2004, home prices continued north on a rocket, and consumers — much to the surprise of every expert, analyst, and economist — continued to gobble up new and existing homes (plus second and third homes) like wild fire. To boot, real estate owners tapped home equity like never before. Mortgage bankers (the sales professionals that they are) met them in the field of opportunity, providing plenty of ammunition (loans).

Not only did lenders provide home buyers with traditional products but they came up with a few new ones and revamped a few oldie but goodies. (Isn't the interest-only loan just a variation on the 7-year balloon?) The trade press and general media have gone gaga over the risk of IOs, but it seems the general public is unfazed despite the fact they can't pay down principal.

In 2004 the nation's mortgage bankers funded a second best ever $2.79 trillion in loans, a 28% decline from the record year of 2003. On the surface a 28% drop might seems perilous but lenders were hardly complaining thanks to the boom in subprime, alt-A, IO, and payment options mortgages. The reason there was little grousing is this: these nonconforming loans carry higher profit margins than Fannie Mae/Freddie Mac loans.

Mortgage bankers funded a record $608 billion in residential subprime loans last year, a stunning 55% increase in production. Subprime and nonconforming boomed for several reasons, chief among them: low rates made these products more affordable than ever, and competition in B&C resulted in better deals for consumers in the form of lower points paid.

Also, the hobbled condition of Fannie Mae and Freddie Mac (due to their accounting scandals) made these "conventional" giants less willing to come up with new products, leaving the door open to Wall Street which stepped in like never before to securitize anything that smacked of "non-vanilla."

In the fourth quarter a record $168 billion in subprime loans were funded compared to $699 billion in the overall origination market — a B&C market share of 24%, also a record. (Subprime loans include credits that are A- to D in quality but some lenders count 'alt-A' and interest-only production as part of their total.)

2004, the Final Tally

Who were the top ranked residential lenders in 2004? If you turn to the pages following this introduction you will see that the big producers of the year were: Countrywide Home Loans with $363 billion funded, followed by Wells Fargo Home ($298 billion), Washington Mutual ($255 billion), Chase Home Finance ($197 billion), and Bank of America ($103 billion).

A year earlier the top five were: Wells Fargo Home ($470 billion), Washington Mutual ($435 billion), Countrywide Home Loans ($434 billion), Chase Home ($307 billion), and Bank of America ($131 billion). In other words, it was the same top five, only with the order slightly altered. (But look out for CitiMortgage — it's moving up fast. And Ameriquest/Argent, a subprime lender, cracked the top 10 — the first time that a B&C lender accomplished this.)
The nation's top five funders, as tracked by National Mortgage News and the Mortgage Industry Directory had a combined market share of 43.51% in 2004. In general, the top 100 control about 85% of the market, a situation that hasn't changed much the past few years.

Even though the numbers suggest that a handful of players control most of the residential production market such a conclusion is deceptive. Keep in mind that almost all of the top five use three channels to produce loans: retail, wholesale, and correspondent. (See definitions table.) Countrywide, after a few years of being ranked third, clawed its way back to the top by purchasing $161 billion in mortgages from other firms. Stated differently, 44% of its production was sourced to it by other mortgage bankers! That's a huge number. Judging by Countrywide's strong earnings in 2004 it's safe to assume that it didn't overpay for those loans.

How We Amassed the Top 500

In this chapter we rank the top 500 residential lenders in 2004. We provide profiles on the top 400 only. (Detailed information on more funders are available by purchasing the eMID, the electronic version of this book.) These profiles include company name, address, phone numbers, key contacts, and so on.

The production volumes in this chapter were culled from surveys sent to more than 3,000 active residential lenders in a database built by National Mortgage News. Mortgage lenders (mortgage bankers, banks, thrifts, credit unions and others) were asked to fill out a three-page survey and return it to us within 30 days. At least two follow-up telephone calls or faxes were sent as well.

In some instances residential lenders either refused to send in a survey or filled out a questionnaire but did not answer all the questions. If you analyze the profiles and rankings in this chapter you might notice that some lenders are missing. If so, it's because they would not cooperate. In certain cases we estimated a firm's loan volume based on previously reported volumes. Estimates are based mostly on two sources: Home Mortgage Disclosure Act (HMDA) data collected by the Federal Reserve, and Government National Mortgage Association issuance data. If you happen to work for a firm that is missing from these rankings and you would like to provide us with numbers please call (202) 433-0322. Our goal, as always, is to provide results on as many lenders as possible. — Paul Muolo, editor MID (Paul.Muolo@SourceMedia.com)