Dominance of the mortgage market by a few big banks is undermining monetary policy, said a senior policy maker at the US Federal Reserve, in comments that may herald greater scrutiny of lenders such as Wells Fargoand JPMorgan Chase.
Bill Dudley, president of the New York Fed, said “concentration of mortgage origination volumes at a few key financial institutions” meant that banks were not passing on low interest rates to borrowers. His comments highlight a new problem in US finance: a lack of competition after the financial crisis and tougher regulation leading a host of banks to pull back from arranging mortgages.
Both Wells and JPMorgan reported record profits last week because of a surge in mortgage loans. Wells now originates about a third of new US mortgages – a level unprecedented in a sector that, historically, has been fragmented.