Big banks are lending less to homebuyers, or they're making less on loans — and sometimes, it's a combination of both.
Some are making less on home loans, in part owed to the Fed and its yearslong zero interest rate policy. But the trend also coincides with a rise in nonbank lenders, like Quicken Loans, that have been gobbling up market share in mortgages in recent years.
"The mortgage market is coming off the highs it realized in 2012," said Erik Oja, S&P Capital IQ banking analyst. "A lot of it is expected, in terms of origination."
JPMorgan Chase reported net income of $266 million in its mortgage banking division, a 21 percent drop when it announced fourth-quarter earnings last week. The bank also posted a quarterly drop of 25 percent in mortgage originations, which were down 2 percent year over year as well.
"A lot of operational complexity to complying" with servicing regulations led to "origination volumes [being] a little lower than we would have otherwise seen," JPMorgan CFO Marianne Lake said on the company's earnings call.
Citigroup's earnings report on its fourth-quarter mortgage originations reflected a 7 percent drop year over year and a 17 percent decline from the third quarter. It reported an even sharper decline in "saleable mortgage rate locks," or mortgage agreements where potential buyers can lock in rates, of 16 percent year over year and 18 percent from the third quarter.
Wells Fargo announced scant gains for the fourth quarter when it reported earnings Friday.
The bank — which was the only one to post a year-over-year increase in its mortgage business — said residential mortgage originations of $47 billion were down more than 14 percent from the prior quarter, but chalked that up to seasonality. Its mortgage banking division reported $71 million more in revenue, though Wells Fargo attributed this to commercial real estate activity.
Looking forward, at $29 billion, the bank's application pipeline is about 14 percent smaller than what it had reported at the end of the third quarter of 2015.
One bank's mortgage numbers showed some resilience to close out 2015.
Bank of America on Tuesday reported lower mortgage banking income for the fourth quarter, both year over year and compared to its third quarter. A highlight might be that the company generated more income on an annual basis from mortgage banking; however, BofA reported that it is yielding less, at 3.47 percent, on residential mortgages than it has in the past.
The bank also reported less outstanding loan and lease balances in both home equity loans and residential mortgages, on both a quarterly and annual basis. Executives said on the call that they continue to hire sales professionals to work on mortgages at branches; BofA increased mortgage originations both year over year and from the third quarter. But there's only so much the bank can do with homebuyers — and CEO Brian Moynihan knows it.
"It will never be the biggest business at Bank of America," Moynihan said in response to an analyst question on the company's mortgage business.
But the elephant in the room — and in the mortgage business — just keeps growing.
Quicken Loans has increased its footprint to cover more than $200 billion worth of home loans since 2013, its website says. The lender, which is private, does not release quarterly data. Quicken had $12 billion in 2008 and was generating less than 1 percent of the mortgage market share, according to Inside Mortgage Finance.
Quicken is part of a group of lenders, many of them online only, that substantially grew their footprint in the mortgage lending business as banks have retreated in the wake of the global financial crisis. In early 2014, nonbank lenders became the primary source of new mortgages, and in the time since have increased their lead over credit unions, large banks and smaller traditional loan providers, according to industry data.
"Wells Fargo and the online lenders have been doing much more" in residential mortgage lending, S&P's Oja told CNBC.com.