The Bank that Rejects the Most Mortgages

Debbie Bremner September 27, 2015

A home loan refused by one bank might be approved by another

The likelihood that a mortgage application will be approved varies widely by bank.

loan-deniedHome-buyer rejection rates ranged from 11% to 34% in 2014-2015 at the 10 largest mortgage lenders, according to data released by the Federal Financial Institutions Examination Council. Those who applied for a mortgage at SunTrust STI -1.24%   faced the lowest rejection rate—3,831 out of 34,749 applications were denied—while those at Chase encountered the highest rejection rate, with 26,894 out of 80,036 (a third) not passing muster. Despite the fact that large lenders sell most of their mortgages to government agencies, many require applicants to clear hurdles that surpass federal guidelines, and they do so in degrees that vary by institution, resulting in confusion for applicants. Home buyers who get rejected for a mortgage at one large bank could get approved at its competitor—assuming they know not to give up the search. It absolutely makes a difference where you go.

Don’t bank on getting that mortgage approved

Number of 2012 home buyers rejected by the top 10 mortgage lenders

                   
          Total Total      
    Name of   Purchase Denied Rejection    
    Institution   Applications Applications Rate    
    Bank of America *   76,355 19,547 25.6%    
    Branch Banking & Trust   43,840 6,855 15.6%    
    Citibank *   44,945 6,422 14.3%    
    Flagstar   52,030 6,853 13.2%    
    JP Morgan Chase   80,036 26,894 33.6%    
    PHH Mortgage   17,034 1,967 11.5%    
    Quicken Loans *   25,038 4,331 17.3%    
    SunTrust Mortgage   34,749 3,831 11.0%    
    US Bank *   52,425 9,014 17.2%    
    Wells Fargo *   399,911 84,687 21.2%    
                   

 

* Applications denied for these lenders includes preapprovals denied

Since the housing downturn, most banks have been selling the mortgages that they originate to government-backed agencies. These groups, including Fannie Mae FNMA 0.00%   and Freddie Mac FMCC -0.68%   , set the minimum guidelines—including credit score, down payment, and debt-to-income ratio requirements—which lenders must follow when determining whether to approve a mortgage applicant. Housing experts say if large lenders stuck to that rubric, they would all have similar rejection rates. They vary widely, however, in part because most lenders add an extra layer of requirements on top of the federal guidelines.

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