Top banks in the lending space, which have relied on the same playbook for years, say they could be more efficient if upcoming changes in financial rules provide more flexibility, several industry executives said. HousingWire. But any change in strategy is expected to take time.
Depositories typically focus on their existing customer base, from affluent customers to first-time homebuyers, with an emphasis on 30-year fixed-rate mortgages. Originations are largely driven by loan officers at bank branches, while call centers pursue refinancing opportunities. Many banks have avoided investing in wholesale channels.
Some institutions instead position themselves primarily as providers of funds to other lenders, acting as business-to-business banks with channels of communication or collateral, for example. In general, banks prefer to retain mortgage servicing rights (MSRs), which allow them to maintain relationships with borrowers throughout the life of the loan. At the same time, banks continue to invest in technology aimed at reducing closing times and improving customer retention.
Banks once dominated the mortgage market. In 2008, they accounted for about 60% of loans and 95% of MSR ownership. However, by 2023 – after taking a nosedive following the Great Financial Crisis – these shares have fallen to around 35% and 45% respectively. Bank retention was at 22% in the fourth quarter of 2025, compared to 50% in 2011, according to the report. Intercontinental Exchange (ICE) data.
But that dynamic could change as regulators revisit capital requirements. The Federal Reserve Vice Chair Michelle Bowman recently said regulators are considering overhauling how residential mortgages and MSRs are treated under the money rules, with proposed changes expected to be released in the coming days.
This will be the second recent attempt to change the rules. A broader proposal for Basel III to be introduced in 2023 was also abandoned.
The service side
Bowman has signed off on two potential future proposals. One could revise the 250% risk weight applied to MSRs while seeking public comment on what level would be appropriate instead. Another would introduce greater risk sensitivity to mortgage exposures, potentially tying capital requirements to loan-to-value (LTV) ratios instead of using a uniform standard.
“Any changes in Basel III that make it easier to borrow money on our balance sheet, or anything that can reduce the risk of mortgages, would be of interest to us,” said Steve Curley, the bank’s head of national business lines at The Western Alliancehe said in the interview. “Most importantly, the biggest change would be any kind of financial relief from housing rights.”
At Western Alliance, the mortgage segment is based on three pillars: AmeriHome Mortgagejournalist lending platform; asset lending and MSR financing; and an on-balance-sheet mortgage portfolio that is typically between $12 billion and $14 billion. The bank positions itself primarily as a provider of finance to the real estate industry
AmeriHome, acquired in 2021 for $1 billion, was ranked as the sixth largest lender in 2025 with an initial volume of $55 billion, up 17.8% year-on-year, according to Inside Mortgage Finance (IMF). It is also the second largest bank lender after that Chasewhich started at $63.4 billion during the same period, up 33.7% year over year.
“We have about $1 billion of mortgage sheet MSRs on our balance sheet, which is about 1% of our total assets. We will consider increasing our exposure if they reduce the risk weight of MSRs,” Curley said. “We have to stay within our risk appetite, but the Western Alliance likes assets and wishes we could have more.”
According to Curley, MSRs generate yields of around 8% to 10%, offer a favorable risk profile and come with fixed deposits.
“I don’t think it’s going to change the business overnight,” Curley said. “However, in the long run, I think the revised capital rules will encourage more banks to participate in the mortgage market.”
Risk assessment
If financial rules are revised along the lines suggested recently by Fed officials, some banks expect to be more active in mortgage originations. Currently, however, the business typically generates only single-digit returns on principal, making it less attractive than other categories of lending, including unsecured loans, executives said.
“Considering the difference in risk profile and the changed interest rates, the compensations under the current capital rules are for banks. to invest more money in other lending areas,” said Raman Muralidharan, president of home mortgage at Citizens Bank. “With the change in the money rules, that inequality is decreasing; it’s not going away completely, but it’s making loans more competitive.”
Citizens, the 30th largest US mortgage lender with a volume of $15.2 billion in 2025 – up 36.9% year-on-year, per the IMF – is also the eighth largest depository mortgage lender. It aims to increase mortgage penetration among its existing customers. Currently, only about 6 percent of the bank’s clients have loans from Citizens, and the goal is to double that share over time.
The bank sees mortgages as an important relationship product. Customers who have a mortgage with Citizens have an average of 3.2 products in the bank, compared to 1.9 products among those who do not have a home loan. Attrition is down 75% from previous relationships, while revenue from non-loan products is up nearly 50%.
In 2018, the bank received Company Franklin American Mortgage Co.but in 2023 it closed its majority channel and has no plans to re-enter, focusing on product development and communication while maintaining its service assets.
Muralidharan believes that changes in financial regulations will make banks more willing to invest in loans and MSRs. Citizens support a regulatory framework that applies to all banks of various sizes and better accounts for credit risk factors.
“Our LTVs are less than 70. We have very good delinquency, very low losses, and capital regulation does not reward that behavior,” Muralidharan said. “The new rules, which allow you to diversify the levels of capital based on risk, are also very important, because that will allow us to lean more on the types of loans that we do, with less risk.”
Way to wait and see
Some banks are taking a wait-and-see approach, relying more on the broader macroeconomic outlook than potential regulatory changes to boost growth. For many, the expected wave of reinvestment represents an immediate opportunity.
If rates fall as expected, the amount of mortgages could rise by about 8% by 2026 to about $2.2 trillion, including a 34% share of refis, according to Mortgage Bankers Association.
“We’re paying attention to the conversations that are happening around interest rates, and eventually, if we’re asked, we’ll talk about that,” said Matt Vernon, head of consumer lending. Bank of America. “But I don’t know that, in fact, it’s going to change our strategy from a broader perspective, because ultimately, we have the tools and resources within our current infrastructure to support our customers.”
The bank focuses on servicing its 67 million customers but also originates loans for non-customers. It generated $26.3 billion in loans by 2025, up 24.7% year-over-year, ranking it as the 16th-largest lender of US assets, per the IMF.
BofA relies on a multi-channel sales force that includes local loan officers, call centers and digital platforms, and aims to grow organically rather than through acquisitions.
Vernon said 2026 could bring lower prices and improved accessibility. While 30-year fixed-rate mortgages are expected to remain strong, variable-rate mortgages are rising to close to 10% of origination.
Home lines of credit remain the bank’s core strategy as homeowners tap into rising levels of equity. BofA also seeks to maintain a competitive edge through comprehensive product offerings and low-payment assistance programs.
“We have all the clients we need, it’s a deep dive into that opportunity,” said Vernon.
At Bank of the US, the 10th largest lender in the US with a volume of 38.5 billion dollars in 2025 – increased by 3.4% year on year – the management is waiting for the clarification of the needs of the new capital.
US Bank maintains a balanced focus on buying and repurchasing mortgages. Mortgages act as the “tip of the spear,” said John Hummel, its head of retail mortgages, and provide insight into borrowers’ broader financial profiles while opening opportunities to deepen relationships into other products.
The bank operates a multichannel mortgage platform that includes sales generation, consumer direct and communications. In 2022, the bank closed the real estate businesses it inherited from the acquisition MUFG Union Bank. US Bank also offers specialized services such as relocation loans for Fortune 500 companies and mortgage agency programs, resulting in a diverse customer base, Hummel said.
“We, as an industry, are all waiting to see what the final rule is in Basel III,” Hummel said. “I wouldn’t say it’s impacted our strategy, and frankly, it’s been several years since the original proposal came out and we went out to get an idea, and now we’re still coming out.”
