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A sign hangs from a branch of Banco Santander in London, U.K., on Wednesday, Feb. 3, 2010.Simon Dawson | Bloomberg via Getty Images

Banks and other mortgage providers have been battered by plunging demand for loans this year, a consequence of the Federal Reserve's interest rate hikes.

Some firms will be forced to exit the industry entirely as refinance activity dries up, according to Tim Wennes, CEO of the U.S. division of Santander.

He would know: Santander — a relatively small player in the mortgage market — announced its decision to drop the product in February.

"We were a first mover here and others are now doing the same math and seeing what's happening with mortgage volumes," Wennes said in a recent interview. "For many, especially the smaller institutions, the vast majority of mortgage volume is refinance activity, which is drying up and will likely drive a shakeout."

The mortgage business boomed during the first two years of the pandemic, driven by rock-bottom financing costs and a preference for suburban houses with home offices. The industry posted a record $4.4 trillion in loan volumes last year, including $2.7 trillion in refinance activity, according to mortgage data and analytics provider Black Knight.

But surging interest rates and home prices that have yet to decline have put housing out of reach for many Americans and shut the refinance pipeline for lenders. Rate-based refinances sank 90% through April from last year, according to Black Knight.

'As good as it gets'

The move by Santander, part of a strategic pivot to focus on higher-return businesses like its auto lending franchise, now seems like a prescient one. Santander, which has about $154 billion in assets and 15,000 U.S. employees, is part of a Madrid-based global bank with operations across Europe and Latin America.

More recently, the largest banks in home loans, JPMorgan Chase and Wells Fargo, have cut mortgage staffing levels to adjust to the lower volumes. And smaller nonbank providers are reportedly scrambling to sell loan servicing rights or even considering merging or partnering with rivals.

"The sector was as good as it gets" last year, said Wennes, a three-decade banking veteran who served at firms including Union Bank, Wells Fargo and Countrywide.

"We looked at the returns through the cycle, saw where we were headed with higher interest rates, and made the decision to exit," he said.

Others to follow?

While banks used to dominate the American mortgage business, they have played a diminished role since the 2008 financial crisis in which home loans played a central role. Instead, nonbank players like Rocket Mortgage have soaked up market share, less encumbered by regulations that fall more heavily on large banks.

Out of the top ten mortgage providers by loan volume, only three are traditional banks: Wells Fargo, JPMorgan and Bank of America.

The rest are newer players with names like United Wholesale Mortgage and Freedom Mortgage. Many of the firms took advantage of the pandemic boom to go public.Their shares are now deeply underwater, which could spark consolidation in the sector.  

Complicating matters, banks have to plow money into technology platforms to streamline the document-intensive application process to keep up with customer expectations.

And firms including JPMorgan have said that increasingly onerous capital rules will force it to purge mortgages from its balance sheet, making the business less attractive.

The dynamic could have some banks deciding to offer mortgages via partners, which is what Santander now does; it lists Rocket Mortgage on its website.

"Banks will ultimately need to ask themselves if they consider this a core product they are offering," Wennes said.

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Tags: as good as it gets rocket mortgage the pandemic firms including interest rates the business the industry the industry black knight according the mortgage the mortgage decision trillion wells fargo

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Dillian Whyte secures Anthony Joshua rematch by the skin of his teeth after edging past Jermaine Franklin on points

DILLIAN WHYTE secured an Anthony Joshua rematch by the skin of his teeth after edging past Jermaine Franklin on points.

The 34-year-old beat AJ in the amateurs but lost their 2015 British title battle and a third clash is all but secured after the London 2012 legend turned up to be ringside at Wembley arena for Whyte's win on Saturday.

3Dillian Whyte sets up a rematch with Anthony JoshuaCredit: Mark Robinson Matchroom Boxing 3Dillian Whyte during his fight with Jermaine FranklinCredit: Mark Robinson Matchroom Boxing

But after Whyte drastically underperformed and the three officials called it: 115-115, 116-112 and 116-112, Joshua will not fear his own Spring comeback against his oldest foe.

Franklin, 29, arrived from the US with an impressive 21-0 record but when he whipped off his top to reveal a flabby torso, ringside fans expected a cakewalk for Dillian and a Sunday morning trip to the bakery for the visitor.

But Franklin showed a clever jab, a decent left hook and all the fundamentals to pose Whyte a problem.

The Brixton Body Snatcher went whacking Franklin’s ribs in the second but he was tagged back more times than new trainer Buddy McGirt would have been happy with.

READ MORE IN boxing WHYTE VS FRANKLIN Close fight ends in majority decision, Anthony Joshua ringside

The bout was one-paced and even after two rounds and the Londoner was looking more flat-footed than usual.

Mohawk-sporting Whyte had the sweat slapped off his scalp in the third and Franklin, who was working in a housing insulation factory before this big break, knew how to protect himself.

Whyte’s modest Wembley arena crowd managed a roar in the fourth when their hero connected with his first meaningful combination.

But Franklin laughed off the shots and got back to peppereding Whyte’s guard as he struggled to get out of second gear.

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Whyte was warned in the fifth when his trademark body blows creeped too low for the referee’s liking.

Whyte had caught or parried most of Franklin’s shots until a sixth-round right hook tagged him flush on the chin. The Jamaica-born bruiser looked buzzed for a moment but regained his cool.

Franklin was superior in the eighth and AJ could be spotted in the VIP seats smiling at his potential prey and pointing out weaknesses to his pals.

By round nine there were boos in the underwhelmed crowd until a Whyte left hook clipped Franklin. But the Michigan man got payback with a booming right that hurt Whyte right on the bell.

Whyte looped in a powerful right hand right at the end of the 10th but Franklin seemed to like it and shouted at his rival’s back as he returned to his corner.

Fans were glad to see the final round finally arrive as the atmosphere had left North Greenwich well before the last tube.

Whyte rocked Franklin in the final 40 seconds and bounced him off the ropes with another whack in the final five.

But he was too tired to capitalise and it went to the judges.

3Dillian Whyte beat Jermaine Franklin on pointsCredit: Mark Robinson Matchroom Boxing Topics
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