Residential: SunTrust and BB&T merge, hope for a larger slice of the mortgage pie

Nonbank lenders have dominated headlines in recent years as they keep gaining ground in mortgage originations. The announcement of BB&T’s merger with SunTrust, however, will likely create a new strong competitor from the banking side.

“Nonbank lenders now account for more than half of all mortgage originations, up dramatically from about a 9% market share a decade ago,” said Tim Rood, Chairman of The Collingwood Group. “At the same time, we’ve seen declining market share and shrinking operations from bank lenders. This kind of consolidation of resources on the banking side could help midsize players like BB&T and SunTrust regain some of their mortgage footing.”

Earlier this month, BB&T and SunTrust announced their merger – the largest bank merger since the financial crisis. The two regional banks represent $66 billion in market value and serve more than 10 million households across the country. As smaller competitors, SunTrust and BB&T ranked among the top 30 mortgage lenders, but analysts expect the merged company to become a top 10 contender.

“Through the merger, the companies will be able to play off one another’s strengths, pairing human resources and recent technology investments,” said Rood.

Residential mortgage lending will account for almost a third of the new company’s lending. BB&T brings over 6,000 mortgage loan officers to the deal, compared to SunTrust’s roughly 1,100. SunTrust brings its digital mortgage platform, investing nearly $1 billion in processing and software in 2018 alone.

Once merged, the bank will become the sixth largest bank in the country with roughly 3,100 branches. Although some of BB&T and SunTrust’s current geographic reach is overlapping, particularly in the Southeast, their combined retail footprint will become a meaningful strategic asset.

Last year, banks, including JPMorgan, Bank of America and Wells Fargo, struggled in mortgage lending, announcing layoffs and shrinking profits. Nonbank lenders, however, continue to grow and now account for six of the top 10 lenders in the US.

“With combined resources and greater geographical coverage, the combined bank lender will have a stronger chance of success in the mortgage space, which is increasingly dominated by nonbank lenders,” said Rood.

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