The depth and impact of the 2007-08 financial crisis, rooted in residential finance, have been apparent for some time. There has never been doubt that its aftermath would transform the way mortgage lending operates in the United States.
Though some aspects of the transformation are far from clear even now – most notably how housing finance will be restructured statutorily – one has crystalized: the retreat of commercial banks from home lending and servicing. This was not a pre-ordained event; at the height of the crisis, it would have been reasonable to envision a future state in which mortgage lending was regulated in such a way that it would become even more exclusively the province of traditional banking institutions. But this is not what has developed. Instead, banks have weighed the costs and benefits of these business lines and concluded that less exposure is the more prudent course.
Originally published in The Government National Mortgage Association on September 23, 2014.
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