TheMReport — News and strategies for the evolving mortgage marketplace.
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44 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION A Bigger Role for Independent Mortgage Banks Here's how independent mortgage banks can benefit low- and moderate-income homebuyers. H ow have indepen- dent mortgage banks (IMBs) helped low- and middle-income bor- rowers achieve their dream of homeownership and what hous- ing finance policies can ensure a stable and liquid mortgage market for consumers using these lenders? These were some of the questions that a white paper titled "The Rising Role of the Independent Mortgage Bank—Benefits and Policy Implications," by the MBA sought to answer. Citing data from the Home Mortgage Disclosure Act (HMDA), the white paper said that there were nearly 900 IMBs across the nation in 2017. They accounted for 16 percent of all HMDA reporting companies, yet originated 54 percent of 1-4 family mortgages—a rise of 25 percent from 2008. Looking at the current busi- ness models being used by IMBs, the white paper pointed out that government lending remained the focus for these banks because of which more than 64 percent of mi- nority homebuyers obtained their financing from an IMB in 2017. Additionally, these lenders originated nearly 59 percent of all home purchase loans for low- and moderate-income borrow- ers. The average loan amount for home purchases in 2017 that were originated by IMBs was $243,000 compared to $280,000 for federally insured depositories like large banks, indicating that these lenders tend to serve borrowers needing lower-balance loans. Looking at the regulatory over- sight for these lenders, the white paper indicated that the regulato- ry framework under which IMBs operate had strengthened over the past decade. Federal regulation had ensured that IMBs comply with all the federal mortgage consumer protection rules that apply to banks and other deposi- tory institutions. IMBs today are also subject to licensing and supervision in every state. Given this framework, the white paper made policy recommendations to enhance the stability of the hous- ing finance market keeping the expanded role of IMBs in mind. They included: • Ensuring qualified mortgage standards as well as govern- ment-sponsored enterprises (GSEs) and FHA/VA lending standards remained focused on creditworthy borrowers and safe products. • Granting IMBs eligibility for the Federal Home Loan Banks (FHLB) system to further strengthen their liquidity posi- tion while maintaining FHLB's core mission of supporting institutions that are committed to housing finance. • Providing government hous- ing finance programs with the funding and resources needed to conduct a thorough coun- terparty oversight and identify emerging risks. • Ensuring that the mortgage servicing compensation regimes of the GSEs and Ginnie Mae preserve and support a deep and liquid market for mortgage servicing rights for all types of servicers. • Standardizing servicing require- ments at the government guarantors to clarify the nature of the liability that participation in their program entails. "Our housing finance system is strongest when the sources of capital are diverse, and risk-taking is predicated on stable loan prod- ucts and sustainable underwrit- ing," the white paper stated. IMBs accounted for 16 percent of all HMDA reporting companies, yet originated 54 percent of 1-4 family mortgages—a rise of 25 percent from 2008.