Is it time to bring banks back to the mortgage business?

"Mortgage lenders have been competing fiercely for their share of this much smaller pie. And in the absence of the banks, IMBs have filled the void nicely, building out more productive and efficient origination channels and servicing platforms while maintaining loan quality and minimizing risk, as evidenced by mortgage delinquency and foreclosure rates much lower than historical averages."

"Banks have lost revenues that would have been generated by their mortgage lending and servicing and have also lost a key opportunity for ongoing customer relationships that would have given them a means to offer a wide variety of financial and investment products and services. For borrowers, she believes, fewer banks engaged in mortgage origination and servicing has reduced the consumer choice and competition that drives down costs."

"I think from a stability perspective, having banks in the mortgage business is a good thing. Banks have always been leaders in the space. They have a suite of products that they can offer consumers. They're safe hands, they're strong lenders. Also, banks have local branches, and there's a lot of people who appreciate that retail component to the relationship."

Mortgage loan issuance has declined dramatically, falling 58% from its recent peak to under 6 million loans annually. Independent mortgage banks (IMBs) have successfully captured market share, developing efficient origination and servicing platforms while maintaining loan quality with delinquency and foreclosure rates below historical averages. Despite this success, industry leaders argue banks should increase mortgage lending engagement. Banks have lost significant revenue and customer relationship opportunities, while borrowers may face reduced competition and higher costs. Banks offer advantages including local branches, diverse product suites, and established consumer trust. Regulators and executives believe bank participation enhances market stability and consumer choice.

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