Mortgage lenders in the US staring a major downturn in demand straight in the face According to industry reports, the US mortgage industry is now facing a wave of consolidation, with the realisation that the mortgage refinancing boom that has boosted their profits at an increasing level over the last few years and is now showing major signs of slowing down. The loss of income from refinancing has cut sharply into the profits of the main lending banks, particularly since the beginning of the year. According to statistics released at an industry conference hosted by the Mortgage Bankers Association (MBA) earlier this week, American banks and other companies involved in the mortgage industry dropped an average total of nine basis points for each home mortgage they financed during the first quarter of 2014, in stark contrast to the sub-prime mortgage profits that have been reported by lenders in recent years, when the mortgage industry entered into a major refinancing frenzy. Now according to one of the most important people in the American mortgage industry, Michael Fratantoni, chief economist for MBA, a continued pattern of losses on lending more than likely to lead to another wave of industry consolidation, as unprofitable banks and lenders attempt to ease their way out of the mortgage business, with the larger mortgage banks happy to take on some of their loans, accordingly increasing their share of the market. At its peak during the early part of 2013, the refinancing boom saw profit margins on home loans reach record levels of 120 basis points. However, these figures have gradually receded as the refinancing boom gradually petered out, leaving banks and other types of mortgage lenders in a weak position. In the first three months of 2013, total mortgage finance came to the sum of $524 billion, driven largely by refinancing which made up for three quarters of that figure. For the same quarter in 2014 the total figure for mortgage financing came to just $226 billion, of which just less than half of that figure had been in mortgage refinancing, giving increase credence to the observation that death knells should be sounded for the refinancing boom, at least for the immediate future. Another major factor which the banks have had to cope with, and has eroded their profits considerably, is the increased guarantee fees being charged for government-backed insurance, which have been steadily eating into profit margins, while, despite exceptionally competitive prices, the number of first-time home buyers has also been dropping at a fast pace. Photo credits: A McCarron May 21, 2014 by Wendy Bartijn 0 comments 3368 viewson Business Insider, Markets & Finance Share this post Facebook Twitter Google plus Pinterest Linkedin Mail this article Print this article Tags: house market, loan, mortgage Next: Holiday Inn open a resort hotel Fort Walton Beach, Florida Previous: Putin pulls of a last minute coup on China gas deal.