Nonbanks continue to win market share in the mortgage market, and companies focused on multifamily loans have made the largest gains.

Home Mortgage Disclosure Act data show nonbanks originated 52.1% of all mortgages in 2017, up from 50.5% in 2016 — the first year since 2006 that nonbanks originated a majority of mortgages. Over the last year, many banks have pulled back from commercial real estate opportunities due to competition and regulatory scrutiny.

Walker & Dunlop Inc. is one of the nonbanks taking advantage of the void left by banks' retreat. In 2017, the nonbank originated $15.66 billion of mortgages, an increase of 52.5% from the previous year. That made it the No. 15 mortgage originator in the U.S., compared to No. 30 the year before.

Chairman and CEO Willy Walker said a pullback by commercial banks in commercial real estate lending has been beneficial for the nonbank's ambitious growth plans. The company is not slowing this year relative to 2017. Through the first two quarters, Walker & Dunlop's total transaction volume was up 3% from the year-ago period.

Management has previously said the company has a long runway to continue delivering outsized growth considering there are many large markets in which the nonbank has a minimal presence. "There are certain geographies where we just don't have feet on the street ... and we're very focused on expanding market share in those markets," Walker said on the 2017 fourth-quarter earnings call.

By contrast, some banks spoke of stiff competition in commercial real estate dampening their loan growth figures. Bank OZK, a leading bank in commercial real estate financing, reported a dramatic slowdown in its origination volume in the second quarter, which management attributed to competition on pricing and structure.

"We do take a very long-term view of this, and our lenders understand when volume is a tertiary consideration and quality is No. 1 and profitability is No. 2," said Chairman and CEO George Gleason II.

Other lenders are less concerned about credit quality. Walker & Dunlop's executives point to the company's ability to gain market share in new geographies as indicative that the nonbank can continue growing market share without abandoning their underwriting principles.

"We will continue to lend billions of dollars for as long as we can with conservative underwriting standards like these," Walker said, pointing to the company's average loan-to-value ratio of 67% and average debt service coverage ratio of 1.40x.

While several multifamily-focused nonbanks reported large gains in volume, some of the largest nonbanks focused on residential mortgages reported year-over-year declines. Quicken Loans Inc. posted a 10.2% drop in funded volume in 2017 compared to the previous year and loanDepot.com LLC showed a 5.1% decline.

Both companies, however, still gained market share since overall mortgage volume declined by 12% in 2017. That was another trend in the mortgage market that should continue in 2018 as higher rates mean dramatically less refinancing activity. The Mortgage Bankers Association's latest forecast predicts a 24% decline in refinance volume for the 2018 full year, driving a 6% drop in overall mortgage volume.

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