JPMorgan was hardly alone in pulling back. Across the banking industry, complex regulations and tougher capital rules after the financial crisis put the squeeze on what was once a major profit center. As the biggest banks scaled down operations and pulled back from riskier corners of the market in response to regulatory scrutiny, non-bank lenders like Quicken Loans Inc. and PennyMac Financial Services Inc. elbowed their way in.

Losing Money

The big banks have struggled to shift costs amid a decline in volumes, and don’t originate as many mortgages through government programs, which tend to be more lucrative, said Jim Cameron, senior partner at Stratmor Group, a mortgage-industry advisory firm.

“It’s like driving a supertanker -- large banks have significant overhead and they’re not as nimble as smaller non-bank lenders,” Cameron said.

By 2018, as rates were rising, the cost to originate a mortgage for the average large bank through retail channels had risen to a record $13,628 per loan, figures from Stratmor show. Big banks lost $4,803 for every mortgage they originated and sold directly to consumers that year, while non-banks generated a profit of $376 per loan.

A lack of marketing focus, inability to quickly pivot when the market changes and ineffective technology spending have all resulted in big banks not doing as well as they should, according to Stratmor.

Emulating Quicken

Quicken has charged past almost every U.S. mortgage provider with the help of flashier technology, like its online Rocket Mortgage platform.

JPMorgan has been looking to emulate Quicken’s efficiency and digital expertise, according to people familiar with internal thinking. The bank has been using technology to automate and digitize its home-loan business to cut costs and appeal to more customers. In the second half of 2018, it rolled out a digital platform for mortgages aimed at reducing paperwork and expediting the loan process.

Next, the bank wants to use everything it knows about its customers’ income, assets and spending habits to be able to target them with personalized, pre-approved offers for home loans. JPMorgan also has been outsourcing some processing jobs to lower-cost locations outside the U.S., the people said, with the goal of ensuring the bank can handle an uptick in origination volumes while keeping costs low.