Since the 2008 housing bust and subsequent Great Financial Crisis (GFC), mortgage lending has steadily shifted away from big banks. In the years that followed—amid tighter regulations, higher capital requirements, and elevated litigation risk—many large banks, including Bank of America, JPMorgan Chase, and Wells Fargo, reduced their mortgage footprint. In that void, nonbank lenders, also known as independent mortgage banks (IMBs), such as Rocket Mortgage, United Wholesale Mortgage (UWM), and LoanDepot, gained market share.
Now, a top Federal Reserve official is openly questioning whether policy and regulation went too far—and is signaling that a policy shift may be coming.
In a February 16 speech at the American Bankers Association’s Community Bankers Conference, the Federal Reserve’s 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.
According to Bowman:
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 ResiClub pulled from the U.S. Department of the Treasury.
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. MSRs, which represent the expected value of servicing income when loans are sold into securitizations, were assigned higher risk weights and subject to deduction thresholds after the crisis. While regulators tightened those rules over concerns about valuation volatility and model risk, the capital treatment also made servicing and, by extension, mortgage origination less economically attractive for banks.
Big banks retreated from mortgages after the 2008 housing market crash-now this Fed governor wants them back
