Nonbanks Thanked for Picking Up Slack in Mortgage Lending

Independent mortgage banks forced to the sidelines following the housing bust are making a comeback. At a conference in san Diego Thursday, officials at Fannie Mae, Freddie Mac and Ginnie Mae all heaped praise on nonbank mortgage lenders for stepping up to provide loans for home purchases at a time when many banks have scaled back. The message: without them, many recent home buyers might still be renters. “If you guys had not stepped up we would have had a hole,” Ted Tozer, the president of Ginnie Mae, told 500 independent mortgage bankers at an industry conference. “The numbers prove that if you are driven out of the industry and we don’t support you, the industry can’t operate.” The government-sponsored enterprises are purchasing more loans than ever from nonbank mortgage lenders largely because big banks have pulled back from selling to Fannie and Freddie after getting clobbered with repurchase requests. Large banks have also dramatically scaled back their Federal Housing Administration lending after paying huge fines to FHA and the Department of Housing and Urban Development to settle claims of improper underwriting. JPMorgan Chase Chairman and Chief Executive Jamie Dimon said earlier this year that the banking giant would be“very, very cautious” about originating FHA loans, given the risk of paying out more claims. Wells Fargo, JPMorgan Chase and Bank of America have all lost market share in the past four years to independent mortgage bankers, Tozer said. “Those three organizations pulling back created a hole of one-third of our capacity,” he said. “The landscape for banks has changed.” Indeed, following the crisis nonbank lenders were struggling to find...