A Look Inside the HMDA Data: Nonbanks Extend Lead as Refis Return

The 2025 HMDA data confirms what many lenders are already feeling:  the mortgage market is recovering from the severe contraction of 2022–2023, but still operating well below historical norms. Total origination volume increased roughly 17% year-over-year to nearly $2 trillion, driven largely by a rebound in refinance activity and continued strength among independent mortgage banks (IMBs). While volume improved, the bigger story remains one of structural change: nonbanks continue gaining market share, refinances are returning but not booming, and scale is becoming increasingly important for lenders competing in a higher-rate environment.

Nonbanks Continue to Expand Their Market Share

IMBs expanded their market share in 2025, accounting for about 60% of all mortgage origination volume. Banks and credit unions continued to lose share overall, despite several large institutions posting meaningful growth.

This trend reflects a longer-term shift in the mortgage industry. Many depositories have reduced their mortgage footprint over the past several years due to capital requirements, margin pressure, and operational costs. Consolidation added to that pressure. The number of active bank lenders declined again in 2025, while the largest institutions captured a larger share of total bank volume. At the same time, IMBs have remained more aggressive and adaptable, particularly in retail and wholesale lending channels.

The result is an industry increasingly divided between large-scale national lenders and smaller niche players fighting for efficiency and differentiation. Despite that concentration, mortgage lending remains highly fragmented overall. The top five lenders still account for only a small portion of total industry production, leaving significant competition across nearly every market and channel.

This shift in who is winning market share is happening alongside another important change: the return of refinance activity.

Refinance Activity Returned

The return of refinance lending in 2025, after historically low levels seen in 2024, was an important boost to mortgage companies while the industry continues to recover. Refinance share increased meaningfully year over year, driven primarily by rate-and-term refinances as borrowers responded to modest rate improvements. Even so, refinance activity remains well below prior-cycle peaks and should be viewed as a normalization rather than a surge.

Purchase lending still accounted for the majority of industry production, but refinances drove most of the market’s overall growth in 2025. That distinction matters; the market recovery was not driven by a surge in homebuying demand, but rather by existing homeowners selectively taking advantage of slightly better rate conditions.

This trend highlights how rate-sensitive borrowers remain following the sharp increase in financing costs over the last several years. Even relatively small declines in rates were enough to stimulate refinance demand, reinforcing how quickly volume could return if rates decline further. However, the recovery has not been evenly distributed across borrowers.

Higher-Balance Loans Drove Much of the Recovery

Another notable theme in 2025 was the continued concentration of activity among larger loan balances and more affluent borrowers. Average loan sizes increased again, supported by elevated home prices and stronger jumbo lending activity. Conventional loans remained the dominant product category, while government lending held relatively stable overall.

The persistence of affordability challenges continued to weigh on potential first-time borrowers, particularly within FHA lending segments. Inventory shortages, high home prices, and elevated monthly payments kept many first-time buyers sidelined despite modest improvements in overall market conditions.

Ultimately, the market recovery disproportionately benefited borrowers with stronger credit profiles, larger balances, and greater financial flexibility.

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Wholesale Channel Continued to Gain Momentum

The broker and wholesale channel posted another modest gain in 2025, continuing the gradual resurgence that has taken place over the past several years. While retail/direct lending still accounted for most of the mortgage volume, several large wholesale-focused lenders significantly expanded production and outpaced overall market growth. Much of the broker channel’s growth came from scaled IMBs leveraging established third-party origination networks.

The trend reinforces an important competitive reality: scale matters. Larger lenders with efficient platforms, broad broker relationships, and diversified channels were generally better positioned to capitalize on improving market conditions.

The wholesale channel’s growth also reflects lenders’ continued focus on flexibility and cost efficiency. Many institutions have increasingly relied on third-party production to maintain volume without the fixed costs associated with large retail sales organizations. In 2026, lenders should reconsider how volume is sourced.

Strategic Implications for Mortgage Lenders

The 2025 HMDA data illustrate that the industry is stabilizing, but is not yet fully healed. For mortgage lending leaders, the environment increasingly rewards operational efficiency, channel diversification, and the ability to pivot quickly as market conditions evolve. Lenders that successfully positioned themselves for refinance opportunities, leveraged broker relationships, or focused on specialized segments generally outperformed peers in 2025.

Looking ahead, the industry appears positioned for gradual improvement rather than rapid expansion. If rates decline further, refinance activity could accelerate meaningfully. However, sustained growth in purchase lending will likely depend on broader improvements in affordability, housing supply, and consumer confidence.

The key takeaway from 2025 is clear: the mortgage market is recovering, but the structure of the industry continues to shift towards nonbanks who remain firmly in control of market share. Scale continues to matter more than ever, and lenders that adapt quickly to changing market dynamics are best positioned for long-term success.

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