{"id":47513,"date":"2026-03-17T21:19:46","date_gmt":"2026-03-17T18:19:46","guid":{"rendered":"https:\/\/mk.gen.tr\/banks-eye-bigger-role-in-mortgages-as-regulators-reconsider-capital-rules\/"},"modified":"2026-03-17T21:19:46","modified_gmt":"2026-03-17T18:19:46","slug":"banks-eye-bigger-role-in-mortgages-as-regulators-reconsider-capital-rules","status":"publish","type":"post","link":"https:\/\/mk.gen.tr\/en\/banks-eye-bigger-role-in-mortgages-as-regulators-reconsider-capital-rules\/","title":{"rendered":"Banks eye bigger role in mortgages as regulators reconsider capital rules"},"content":{"rendered":"

Top banks in the mortgage space, which have relied on a similar playbook for years, say they could become more active if upcoming changes to capital rules provide more flexibility, several industry executives told HousingWire<\/strong>. But any shift in strategy is expected to take time<\/a>.<\/p>\n

Depositories typically focus on their existing customer base, ranging from wealthy clients to first-time homebuyers, with a heavy emphasis on standard 30-year fixed-rate mortgages. Originations are largely driven through loan officers in bank branches, while call centers pursue refinancing opportunities. Most banks<\/a> have avoided investing in the wholesale channel.<\/p>\n

Some institutions instead position themselves primarily as liquidity providers to other lenders, operating as business-to-business banks with correspondent channels or warehouse lending, for example. Overall, banks prefer to retain mortgage servicing rights<\/a> (MSRs), allowing them to maintain relationships with borrowers throughout the life of a loan. At the same time, banks continue to invest in technology aimed at shortening closing times and improving customer retention.<\/p>\n

Banks once dominated the mortgage market. In 2008, they accounted for roughly 60% of mortgage originations and about 95% of MSR ownership. By 2023, however \u2014 after adopting a more conservative posture following the Great Financial Crisis \u2014 these shares had fallen to roughly 35% and 45%, respectively. Bank refi retention was at 22% in the fourth quarter of 2025, compared to 50% in 2011, according to Intercontinental Exchange<\/strong> (ICE) data.<\/p>\n

But that dynamic could shift as regulators revisit capital requirements. Federal Reserve<\/strong> Vice Chair Michelle Bowman recently said regulators are considering recalibrating how residential mortgages and MSRs are treated under capital rules, with proposed changes expected to be released in the coming days. <\/p>\n

This would be the second recent attempt to change the rules. A broader Basel III<\/a> proposal introduced in 2023 was later abandoned.<\/p>\n

The servicing side<\/h2>\n

Bowman<\/a> <\/strong>signaled two potential forthcoming proposals. One would review the 250% risk weight applied to MSRs while seeking public comment on what level would be appropriate instead. The other would introduce greater risk sensitivity for residential mortgage exposures, potentially tying capital requirements to loan-to-value (LTV) ratios rather than applying a uniform standard.<\/p>\n

\u201cAny changes to Basel III that make mortgage loans easier to put on our balance sheet, or anything that would reduce the risk weight of warehouse lending<\/a>, would make us interested,\u201d Steve Curley, chief banking officer of national business lines at Western Alliance<\/strong>, said in an interview. \u201cEven more importantly, the biggest change would be any sort of capital relief on mortgage servicing rights.\u201d<\/p>\n

At Western Alliance, the mortgage segment rests on three pillars: AmeriHome Mortgage<\/a><\/strong>\u2019s correspondent lending platform; warehouse lending and MSR finance; and a balance-sheet mortgage portfolio that typically ranges between $12 billion and $14 billion. The bank positions itself primarily as a liquidity provider to the mortgage industry<\/p>\n

AmeriHome, acquired in 2021 for $1 billion<\/a>, ranked as the sixth-largest mortgage lender in 2025 with $55 billion in origination volume, up 17.8% year over year, according to Inside Mortgage Finance (IMF). And it\u2019s the second-largest bank lender after Chase<\/a><\/strong>, which originated $63.4 billion in the same period, up 33.7% year over year.<\/p>\n

\u201cWe have\u00a0approximately $1 billion\u00a0in mortgage MSRs on our balance sheet, which is about 1% of our total assets. We would\u00a0consider\u00a0increasing\u00a0our exposure if they reduce\u00a0the risk weight of MSRs,\u201d Curley said. \u201cWe have to stay within our risk appetite, but Western Alliance\u00a0likes\u00a0the asset\u00a0and wishes\u00a0we could own\u00a0more.\u201d<\/p>\n

According to Curley, MSRs generate yields of about 8% to 10%, offer a favorable risk profile and come with custodial deposits.<\/p>\n

\u201cI don\u2019t think it\u2019s going to change the business overnight,\u201d Curley said. \u201cHowever, over time, I think revised capital rules would encourage more banks to participate in the mortgage market.\u201d<\/p>\n

Evaluating the risks<\/h2>\n

If capital rules are revised along the lines recently suggested by Fed officials, some banks expect to become more active in mortgage originations. For now, however, the business often generates only single-digit returns on capital, making it less attractive than other lending categories, including unsecured loans, executives said.<\/p>\n

\u201cTaking into account differences in risk profile and risk-adjusted rates of return, the\u00a0incentives\u00a0under current capital rules are\u00a0for banks\u00a0to invest more in other lending areas,\u201d said Raman Muralidharan, president of home mortgage at Citizens Bank<\/strong>. \u201cWith changes in capital rules, that disparity reduces; it doesn\u2019t completely go away, but it makes mortgages more competitive.\u201d<\/p>\n

Citizens, the 30th-largest U.S. mortgage lender with $15.2 billion in volume in 2025 \u2014 up 36.9% year over year, per IMF\u2014 is also the eighth-largest depository mortgage lender. It aims to expand mortgage penetration among its existing customers. Currently, only about 6% of the bank\u2019s clients have their mortgage with Citizens, and the goal is to double that share over time.<\/p>\n

The bank sees mortgages as a key relationship product. Customers who hold a mortgage with Citizens have about 3.2 products with the bank, compared with 1.9 products among those without a home loan. Attrition falls by roughly 75% in the former relationships, while revenue from non-mortgage products increases by about 50%.<\/p>\n

In 2018, the bank acquired Franklin American Mortgage Co.<\/strong><\/a>, but in 2023 it shut down<\/a> its wholesale channel and has no plans to reenter, focusing instead on retail and correspondent production while retaining its servicing assets.<\/p>\n

Muralidharan believes that changes to capital rules\u00a0will\u00a0make banks more willing to deploy capital toward jumbo mortgages<\/a> and MSRs.\u00a0Citizens supports a regulatory framework that applies across banks of different sizes and better accounts for loan risk characteristics.<\/p>\n

\u201cOur LTVs are below 70. We have great delinquency<\/a> performance, very low losses, and the capital rule doesn\u2019t reward that behavior,\u201d Muralidharan said. \u201cThe new regs, which sort of allow you to distinguish capital levels based upon risk, are also really important, because that will allow us to lean in even more to the kinds of mortgages we make, which are low risk.\u201d<\/p>\n

Wait-and-see approach<\/h2>\n

Some banks are taking a wait-and-see stance, relying more on the broader macroeconomic outlook than on potential regulatory changes to drive growth. For many, an expected refinance wave<\/a> represents the most immediate opportunity.<\/p>\n

If rates decline as anticipated, overall mortgage volume could rise about 8% in 2026 to roughly $2.2 trillion<\/a>, including a 34% share for refis, according to the Mortgage Bankers Association.<\/strong><\/p>\n

\u201cWe\u2019re certainly paying attention to the discussions that are occurring from an interest perspective, and ultimately, if asked, will opine on that,\u201d said Matt Vernon, head of consumer lending at Bank of America<\/a><\/strong>. \u201cBut I don\u2019t know that, frankly, it would change our strategy from a broader perspective, because ultimately, we have the tools and resources within our current infrastructure to support our clients.\u201d<\/p>\n

The bank focuses primarily on serving its 67 million clients but also originates mortgages for non-customers. It produced $26.3 billion in mortgage volume in 2025, up 24.7% year over year, ranking as the 16th-largest U.S. mortgage lender, per IMF. <\/p>\n

BofA relies on a multichannel sales force that includes local lending officers, call centers and digital platforms, and it aims to grow organically rather than through acquisitions<\/a>.<\/p>\n

Vernon said 2026 could bring lower rates<\/a> and improved affordability<\/a>. While 30-year fixed mortgages are expected to remain dominant, adjustable-rate mortgages<\/a> are rising nearer to 10% of originations. <\/p>\n

Home equity lines of credit<\/a> remain a core bank strategy as homeowners tap rising equity levels. BofA also seeks to maintain a competitive edge through comprehensive product offerings and down payment assistance<\/a> programs.<\/p>\n

\u201cWe have all of the clients that we need, it\u2019s just deeper penetration of that opportunity,\u201d Vernon said.\u00a0<\/p>\n

At U.S. Bank<\/a>, the 10th-largest U.S. mortgage lender with $38.5 billion in volume in 2025 \u2014 up 3.4% year over year \u2014 executives are waiting for clarity on new capital requirements.<\/p>\n

U.S. Bank maintains a balanced focus on purchase and refinance lending. Mortgages serve as the \u201ctip of the spear,\u201d said John Hummel<\/a>, its head of retail home lending, and they provide insight into borrowers\u2019 broader financial profiles while opening opportunities to deepen relationships across other products.<\/p>\n

The bank operates a multichannel mortgage platform that includes retail, consumer-direct and correspondent production. In 2022, the bank closed<\/a> the wholesale mortgage businesses it inherited in the acquisition of \u00a0MUFG Union Bank<\/strong>.\u00a0U.S. Bank also offers specialized services such as corporate relocation lending for Fortune 500 companies and housing finance agency programs, resulting in a diversified client base, Hummel said.<\/p>\n

\u201cWe are, as an industry, all waiting to see what the final rule is on Basel III,\u201d Hummel said. \u201cI wouldn\u2019t say it has influenced our strategy at all, and quite frankly, it\u2019s been several years since the initial proposal came out and went out for opinion, and now it\u2019s still forthcoming.\u201d<\/p>","protected":false},"excerpt":{"rendered":"

Top banks in the mortgage space, which have relied on a similar playbook for years, say they could become more active if upcoming changes to capital rules provide more flexibility, several industry executives told HousingWire. But any shift in strategy is expected to take time. Depositories typically focus on their existing customer base, ranging from…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts\/47513"}],"collection":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/comments?post=47513"}],"version-history":[{"count":0,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts\/47513\/revisions"}],"wp:attachment":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/media?parent=47513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/categories?post=47513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/tags?post=47513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}