Shifting Dynamics: The Potential Revival of Bank Participation in Mortgage Lending
A notable commentary from Michelle Bowman, the vice chair for supervision at the Federal Reserve, has sparked fresh discussions in the mortgage industry regarding the potential for banks to regain a more significant role in mortgage lending. Bowman's observations about the decreasing share of banks in the mortgage market, dropping from 60% in 2008 to approximately 35% in 2023, point to a pivotal moment for the sector.
The Role of Banks in the Mortgage Landscape
Marty Green, a mortgage attorney, highlights that there could be advantages to having banks more actively involved in mortgage lending again. While the shift to non-bank lenders has provided access to diverse services, the systematic risks associated with a concentration of mortgage servicing in non-bank entities raise concerns. Green emphasizes the need for a fresh examination of the regulatory framework that governs how banks can participate in the mortgage landscape.
Potential Benefits for Brokers and the Industry
Despite some initial worries about how this change might impact mortgage brokers, Green argues that increased bank involvement could lead to more opportunities in the wholesale market for brokers. He suggests that banks might seek to expand their networks of originators, presenting new avenues for collaboration. This shift could revitalize the marketplace by potentially increasing demand for mortgage servicing rights.
A Cautious Approach to Change
While the insights shared by Bowman are preliminary and may take years to manifest in the regulatory landscape, the conversation around restoring a balance between bank and non-bank participation in mortgage lending is significant. Green suggests that while change may be slow, the long-term impact could ultimately bring more stability and options for consumers in the mortgage market.
As the industry awaits further developments, keeping abreast of these changes will be crucial for all stakeholders involved. The fluctuating dynamics call for open discussions as we navigate the future of mortgage lending and servicing.
