Big banks retreated from mortgages after the 2008 housing market crash-now this Fed governor wants them back

"In 2008, banks originated around 60% of mortgages and held the servicing rights on about 95% of mortgage balances. In 2023, banks originated around 35% of mortgages and held the servicing rights on about 45% of mortgage balances. That's pretty in line with the data pulled from the U.S. Department of the Treasury."

"Federal Reserve Vice Chair for Supervision Michelle Bowman pointed to what she described as a 'significant migration' of mortgage origination and servicing out of the banking sector over the past 15 years. During her speech, Bowman suggested that post-2013 capital rules-particularly the treatment of Mortgage Servicing Rights (MSRs) under Basel standards-may have contributed to the mortgage retreat by banks."

Since 2008, mortgage lending has significantly shifted from large banks to nonbank lenders due to stricter regulations, higher capital requirements, and litigation risks. Major banks like Bank of America, JPMorgan Chase, and Wells Fargo reduced mortgage operations while independent mortgage banks such as Rocket Mortgage and UWM gained market share. Federal Reserve Vice Chair Michelle Bowman highlighted this migration, noting banks originated 60% of mortgages in 2008 versus 35% in 2023, and held servicing rights on 95% of balances then versus 45% now. Bowman suggested post-2013 capital rules, particularly regarding Mortgage Servicing Rights under Basel standards, may have contributed to banks' mortgage retreat by assigning higher risk weights and deduction thresholds.

Read at Fast Company