The commercial-banking sector isn’t running away from the mortgage-servicing business the way it did a few years ago, but aggregate figures show the industry continues to favor whole loans over mortgage servicing rights.

Commercial banks held $2.217 trillion of single-family mortgages in portfolio as of the end of June, according to a new Inside Mortgage Finance analysis of call report data. That was up 2.2 percent from a year ago. Over the same period, commercial banks reported a 2.1 percent decline in servicing for others, typically MSR on loans pooled in mortgage-backed securities.

Banks serviced $3.280 trillion of home loans for other investors, which still represented 59.7 percent of their total mortgage servicing, and the industry accounted for 45.9 percent of the total MSR market – now the second-largest share of any major group.

Nonbanks increased their MSR portfolios by 2.0 percent, pushing them to $3.319 trillion, passing commercial banks for the first time. Nonbanks also upped their holdings of un-securitized home loans by 1.9 percent in the second quarter. Observers note that companies like PIMCO and Blackrock that invested in non-agency MBS prior to the financial collapse remain leery of the sector and prefer to buy non-qualified mortgages as whole loans.

The Federal Reserve reported the outstanding supply of non-agency MBS continues to dwindle, falling another 1.6 percent in the second quarter.

The bank retreat from agency MBS servicing is mostly taking place at the top as Wells Fargo, JPMorgan Chase and Bank of America all saw declines – 0.8 percent, 1.4 percent and 3.8 percent, respectively – from the first to the second quarter. U.S. Bank, SunTrust, BB&T and Fifth Third all grew their agency servicing rights during the period.

Meanwhile, thrifts and credit unions are growing both sides of the servicing business. Thrifts posted a slight 0.3 percent increase in their whole-loan portfolios during the second quarter along with a 4.7 percent jump in servicing for others. Credit unions reported a 2.8 percent gain in retained mortgage loans and a 1.2 percent increase in servicing for others.

The total supply of home-mortgage debt outstanding grew 0.8 percent during the second quarter, according to the Fed. The agency MSR market increased at the same rate, although its 5.8 percent expansion since June 2017 was greater than the 3.2 percent increase in total single-family debt.

Ginnie Mae remained the fastest-growing component of the agency market, although it could slow down as its relatively younger portfolio ages. The government-insured market grew dramatically following the housing market crash, while Fannie Mae and Freddie Mac servicing increased at a more measured pace.