Regions Financial Corporation (NYSE:RF) – the fact of the mortgage matter
Last week, Regions Financial Corporation (NYSE:RF) touched a new 52-week high and at the moment, is trading at $9.12. Over the past 30 days, the average volume was 14.38M shares. The company has a $12.89 billion market cap and is a segment of the financial sector as well as the banking industry. Scores of mortgage lenders as well as community banks are pushing-up through the ruins of the housing collapse in the United States. The dust has finally settled and profits have been rising amidst an increased demand for home loans, new purchases or even mortgage refinancing. Larger banks have retrenched post the financial crisis and business, on the whole is looking brighter.
The power of small
Last year, the five largest mortgage lenders in the U.S controlled only 53.2% of the market. This was down by almost 2/3rd in 2010. As the number of small lenders increases, by 2014, that may even shrink down to 40% of the $1.8 trillion, mortgage market is what industry watchers opine. The influx of smaller lenders is essentially a boon for consumers. Most smaller lenders and banks maintain that low interest rates, lower costs, and their ability to process applications faster, permit them to have a more aggressive pricing stand than the larger banks.
It is a given that when the biggies get backed-up, they raise their price in order to slow down volume. That in itself becomes an opening point for other lenders. The consumers psyche is simple. What they are thinking is- Why should I end up paying an additional $100 per month?
What adds to their muscle?
Some comparatively smaller lenders may have the backing of hedge fund money, and private equity. They have also been taking advantage of the federal guarantees that make home loans friendlier towards low-income borrowers. The Federal Housing Authority (FHA) insures loans such as these. The down-payment that is required may be as low as 3.5% of the purchase price, in comparison with the 20% that it usually is. However, big banks have realized where their failings lie and have been ramping-up and lenders such as Regions Financial Corporation (NYSE:RF)
will have to be on their toes to avoid being cut short.