The housing market is “the most interest-rate sensitive segment of the economy”, and the decline in home sales “is not likely to improve” any time soon, the chief economist said last week. by Freddie Mac, Sam Khater. Total transactions for existing single-family homes, apartments and condos fell more than 21% in the United States in the third quarter.

In an attempt to survive, non-banks are counting on unique offerings beyond home loans and the strength of their balance sheets to help them weather the worst of the housing rout so that they are always there to offer mortgages when the market finally recovers.

“We want to make sure we’ll be there at the other end of the economic cycle no matter what,” Harit Talwar, president of Better and former consumer banking architect at Goldman Sachs Group Inc., said in an interview. . “We want to be the last man standing.”

Talwar estimates New York-based Better has cut some 7,000 jobs over the past year. As it continues to downsize, the latest round is just 28 positions, according to a filing with the state this month.

Banks were once the main players in originating home loans, but after the collapse of the US housing market, triggering the global financial crisis of 2007 and 2008, de-risking reforms were enacted which led traditional lenders to withdraw from the mortgage market. This retreat allowed non-bank lenders to take over.

Since then, companies such as Detroit-based Rocket and California-based LoanDepot Inc. have dominated the space, with venture capital-backed fintechs also bursting into the business.

“Non-banks took over from banks as they pulled out of what was a very risky business,” said Susan Wachter, professor of real estate at the Wharton School at the University of Pennsylvania. “They did extremely well, very efficiently, especially because they had new systems in place for scalable and rapid capacity increases.”

The COVID-19 crisis and resulting government stimulus efforts, which left consumers awash with cash and sent interest rates to rock bottom levels, fueled a surge in home purchases and mortgage refinances. Mortgage providers created a record $4.3 trillion in home loans last year, according to data provider Black Knight Inc.

When interest rates rose, demand collapsed. Black Knight estimates origination volume will fall to $2.3 trillion this year, and Fannie Mae expects a further drop in 2023. The decline in volume has forced lenders to make quick and deep cuts. Non-banks aren’t the only ones feeling the pain. Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co have all cut staff in their mortgage businesses.