The Future of GSE Lending

[Non Sequitur]

I ran across this interesting post on LinkedIn. Thoughts?

"Truth: The nation's Goliath Banks didn't quit Mortgages... they were forced out!

Coby Hakalir, thank you for laying down the numbers.

The collapse is brutal: Wells Fargo's origination volume down 88% in 6 years.

Citi, Capital One, JPMorganChase... all running for the hills.

It's tempting to say they just couldn't innovate fast enough. But that’s NOT the real reason...

I believe the massive bank exodus from the mortgage trenches is a direct, logical outcome of how D.C. reacted to the 2008 crisis.

After receiving taxpayer bailouts, major banks were simultaneously painted as the villains. This led to a torrent of hyper-regulation: Dodd-Frank, the CFPB, and an era of massive, career-ending fines.

Honestly, why would any CEO greenlight a business line that generates 5 or maybe 10% profit when it carries the catastrophic risk of a multi-billion-dollar regulatory enforcement action?

As Charlie Scharf and Jamie Dimon told their shareholders: The risk-adjusted return on origination became "subpar" and "****ty."

Meaning: The high compliance costs and legal liability of originating every loan were the real economic killers.

The other structural nail in the coffin was the government's refusal to all similar protections that Fannie Mae and Freddie Mac still have.

Banks needed to minimize risk and maximize guaranteed returns by exiting mortgage origination and that meant shutting down expensive, highly scrutinized retail mortgage operations.

IMBs, Brokers, Community Banks and Credit Unions take the costly, messy front-end work, then the big banks simply buy the clean, GSE-backed paper for their servicing portfolios.

Don't you think that if D.C. incentivized banks to actually compete with the GSEs by requiring them to keep protected mortgages on their balance sheets, the banks would have fought like crazy for market share...

Instead, the nation's Goliath Banks were given the ultimate risk-free off-ramp.

The result: The industry has fundamentally flipped the entire risk profile in a few short years.

The big bank exodus was a strategic withdrawal dictated by the government.

The result: Goliath Banks are now major players in servicing and buying, collecting low-risk fees without the compliance headache.

I agree that the market is ours to lose. IMBs, Brokers, Community Banks and Credit Unions have the agility and hunger to deliver the "Venmo-speed" experience the next generation demands.

However, we must all answer the final challenge: Capital Resilience!

We must also prove our somewhat less-regulated structure can withstand the varying volatility.

We must build loyalty that goes beyond the loan officer/originator... creating sustainable, enterprise-level value that the big banks simply can't or prefer not to replicate.

The goliath banks can call what we do "subpar", but IMBs, Brokers, Community Banks and Credit Unions came to the rescue when they exited, so now we must continue to show them what market excellence looks like."

See next post for related post.

 

[Non Sequitur]

Related post:

"In 2012, Wells Fargo originated $500 billion in residential mortgages—nearly 30% of the entire U.S. market. That volume was more than the next several competitors combined.

Yesterday CEO Charlie Scharf called mortgages "subpar" and can't articulate a path forward.

Q3 2019 originations: $58 billion
Q3 2025 originations: $7 billion
88% collapse in six years
From 30% market share to a fraction of that

It's a changing of the guard.

JPMorganChase largely exited non-customer mortgage origination
Citigroup-US shuttered its retail mortgage business entirely in 2021
Capital One exited home lending in 2023
Ally Financial Group pulled back
Popular and WaFd Bank both scaled down or exited

At their peak, the largest banks controlled over 50% of mortgage origination. Today, that figure has flipped—non-bank lenders now originate nearly 70% of all U.S. mortgages.

The big banks can't innovate fast enough. They can't move quickly enough. They can't deliver the customer experience the next generation of homebuyers demands.

IMBs and brokers have the agility to build something better - mobile-first experiences from the ground up. Digital closings. Instant pre-approvals. AI-powered underwriting that actually works.

Millennials and Gen Z aren't walking into bank branches. They're not filling out paper applications. They expect Venmo-speed experiences, radical transparency, and answers in hours, not weeks.

The IMB and broker channel can deliver that, and aren't burdened by the cross-selling mandates that make bank loan officers push credit cards mid-application.

The market share is there for the taking. The technology exists. The talent is in our industry. The borrowers need us more than ever.

But the brokers and IMBs must prove they're not just filling the void—they need to elevate the industry. That means:
Capital resilience
Compliance excellence
Transparency and ethics
Innovation

Wells Fargo originated 30% of mortgages and called it "subpar."
Show them what excellent looks like."

 

[alebrewer]

From the Stratmor Group:

 

[Digger88]

what grok said about this post:

As a mortgage policy expert, I'll evaluate the key claims in these LinkedIn posts, which argue that major banks were effectively "forced out" of mortgage **origination** due to post-2008 regulations (Dodd-Frank, CFPB oversight, and heightened compliance risks), leading to a shift toward non-bank lenders (IMBs, brokers, community banks, and credit unions).

### Factual Accuracy of Specific Claims
- **Wells Fargo's origination volume**: The posts cite ~$500 billion in 2012 (with ~30% market share) dropping to $58 billion in Q3 2019 and $7 billion in Q3 2025 (an 88% collapse over six years).
This is largely accurate. Wells Fargo originated around $500 billion annually in the early 2010s post-Wachovia acquisition, holding dominant market share (often 20-30%). By Q3 2019, quarterly volume was indeed ~$58 billion. Recent data shows Q3 2025 at $7 billion (down slightly from Q2 2025's $7.4 billion), reflecting a sharp multi-year decline as the bank scaled back retail and correspondent channels.

- **Other bank exits**:
JPMorgan Chase largely de-emphasized non-customer origination.
Citigroup significantly wound down U.S. retail mortgage operations around 2021 (including servicing transfers).
Capital One fully exited mortgage origination in 2017 (not 2023 as stated—one factual error).
Others like Ally scaled back.
These retreats are well-documented.

- **Market share flip**: At their peak (post-crisis), big banks held over 50% of origination. Today, non-banks (IMBs) originate the majority—often cited as nearly 70% in recent years, though banks regained some ground in 2022-2024 due to higher rates favoring deposit-funded banks. Overall, the long-term shift to non-banks holds true.

- **CEO quotes**:
Wells Fargo CEO Charlie Scharf has repeatedly called mortgage returns "**subpar**" and signaled a strategic retreat, focusing on existing customers and underserved communities rather than volume leadership.
JPMorgan's Jamie Dimon has described the mortgage business as a "******ty**" one with poor long-term returns.

### Core Argument: Was This a "Forced" Exodus Due to Regulation?
The posts' central thesis—that Dodd-Frank/CFPB created asymmetric risks, making origination unviable for banks while GSEs (Fannie/Freddie) retained protections—has substantial merit but isn't the full story.

**Supporting evidence for the regulatory impact**:
- Post-2008, banks faced massive fines (e.g., National Mortgage Settlement), stricter ability-to-repay rules, and CFPB enforcement focused on consumer protection.
- Origination carries high compliance costs and litigation risk (e.g., fair lending scrutiny).
- Banks shifted to buying GSE-conforming loans for servicing portfolios (low-risk fee income) or holding them on-balance-sheet, avoiding the "messy" front-end origination done by less-regulated non-banks.
- Non-banks (IMBs) face lighter direct oversight in some areas and can more easily sell to GSEs without retaining skin in the game.

**Counterpoints and nuances**:
- The shift accelerated in 2022-2023 due to rising interest rates, collapsing refinance volume, and thin gain-on-sale margins—not purely regulation.
- Banks still originate (e.g., Wells Fargo at ~$7-7.4 billion quarterly in 2025; JPMorgan and Bank of America remain active), but selectively.
- Non-banks' agility (digital tools, broker models) and lower overhead helped them capture share, especially during low-rate booms.
- Capital resilience is a valid challenge for non-banks, as they rely on warehouse lines (often from... big banks) and can face liquidity squeezes in downturns.

### Overall Assessment
The posts are **mostly true** and insightful. They correctly diagnose a structural shift driven in large part by post-crisis policy, which raised risk-adjusted costs for bank origination while allowing non-banks to thrive on the front end. Big banks didn't "quit" voluntarily in the sense of innovation failure alone; regulatory asymmetry played a key role in making origination less attractive relative to safer servicing/investment activities.

That said, the narrative slightly overstates "force"—banks made rational business decisions in a changed environment, and market cycles (e.g., rate hikes) amplified the retreat. The opportunity for IMBs/brokers/community institutions is real: faster, tech-driven experiences can win younger borrowers. But as the posts note, proving long-term resilience (capital, compliance, ethics) will determine if this "changing of the guard" endures.

If you'd like deeper dives into specific data (e.g., current market shares or regulatory texts), let me know!

 

[Digger88]

what grok said about the need for appraisers in the next 10 years:

As a mortgage policy expert, I'll outline the outlook for residential appraisers over the next 5-10 years (through roughly 2030-2035), based on current trends in technology, regulation, market structure, and labor projections.

### Overall Job Outlook
The demand for licensed residential appraisers remains stable but evolves rather than declines sharply. The U.S. Bureau of Labor Statistics (BLS) projects about **4-5% growth** in employment for property appraisers and assessors from 2024-2034, roughly in line with average job growth across all occupations. This translates to several thousand openings annually, driven by retirements, economic expansion, and ongoing needs in real estate transactions. However, the nature of the work shifts toward hybrid models, with appraisers handling more complex cases while technology manages routine ones.

### Key Drivers Reducing Routine Full Appraisals
- **Expanded Appraisal Waivers and Alternatives**: In 2025, Fannie Mae and Freddie Mac significantly broadened "Value Acceptance" (appraisal waivers) to higher LTV ratios (up to 90-97% for purchases), potentially covering more first-time buyers. These waivers rely on automated valuation models (AVMs) and historical data, bypassing full appraisals for low-risk loans. Since 2020, such programs have already saved borrowers billions in fees, and adoption is accelerating.
- **Hybrid and Desktop Appraisals**: GSEs fully rolled out hybrid appraisals in early 2025 (Fannie effective March, Freddie April). In hybrids, a third-party collector (e.g., inspector or agent) gathers property data/photos, while a licensed appraiser analyzes it remotely to form the opinion of value. Desktops go further, with no interior/exterior inspection. These formats are faster, cheaper, and increasingly eligible for most one-unit properties (purchases, refis, primary/second/investment). Adoption is growing, especially as lenders seek efficiency in higher-volume markets.
- **AI and AVM Advancements**: AI tools (e.g., image recognition, predictive analytics) automate data gathering, comp selection, and trend analysis, boosting accuracy and speed. Industry consensus holds that AI augments rather than replaces appraisers—it handles repetitive tasks, allowing focus on judgment-heavy work. USPAP and lender rules still require a licensed appraiser's sign-off for credibility and liability.

### Areas of Sustained or Growing Need for Traditional/Human Appraisers
- **Complex, Non-Conforming, or High-Risk Properties**: Waivers/hybrids are limited to low-risk, conforming loans (e.g., good data history, standard conditions). Unique homes, rural areas, new construction, distressed properties, flips, or those with condition issues will continue requiring full interior/exterior appraisals. Non-bank lenders (IMBs, now ~70% of originations) and private/portfolio loans often demand thorough valuations.
- **Non-Purchase Transactions**: Refinances, HELOCs, reverse mortgages, estate settlements, divorces, tax appeals, and litigation rely heavily on appraisers outside GSE waiver programs.
- **Regulatory and Compliance Emphasis**: Post-2008 rules (e.g., Dodd-Frank, CFPB) mandate independent, unbiased valuations. Bias scrutiny and fair lending enforcement ensure human oversight remains essential—AI alone can't fully address nuanced judgment or accountability.
- **Market Cycles and Volume Spikes**: In hot markets or rate drops (potentially post-2025 if rates ease), appraisal bottlenecks could re-emerge, increasing demand for appraisers skilled in hybrids/full reports.
- **Evolving Role**: Appraisers who embrace tech (e.g., AI tools for reports, hybrid workflows) will thrive, focusing on higher-value analysis. Some may specialize in reviewing third-party data for hybrids or consulting on disputed values.

### Challenges and Risks
- **Volume Pressure**: More waivers/hybrids could reduce full appraisal orders by 20-30% in eligible segments over the next decade, pressuring fees and forcing consolidation (e.g., fewer solo practitioners).
- **Aging Workforce**: Many appraisers are nearing retirement, creating openings but also barriers for new entrants (training requirements are rigorous).
- **Non-Bank Dominance**: IMBs often prioritize speed/cost, favoring alternatives, but they still need appraisers for non-eligible loans.

In summary, residential appraisers won't disappear—human expertise is irreplaceable for credibility—but the field becomes more tech-integrated and selective. Strong demand persists for skilled professionals handling complex valuations, reviews, and non-GSE work. Adaptability (e.g., hybrid certification, AI proficiency) will be key to success. If rates fall and volumes rise in the late 2020s, the profession could see a resurgence.

 

[Essexfenwick]

Highly skilled

=
MAI // SRA marketing

 

[Fernando]

Banks originally were relied upon to make residential loans.
Then recently, banks were allowed to make money on other more "risky" opportunities.
At many big banks, they have wealth advisors helping the rich make higher returns than what bank normally gives with CDs.
There's more profit for banks to speculate in higher risk investments since government will bail them out.

 

[Surf Cat]

what grok said about the need for appraisers in the next 10 years:

USPAP and lender rules still require a licensed appraiser's sign-off for credibility and liability.

**Evolving Role**: Appraisers who embrace tech (e.g., AI tools for reports, hybrid workflows) will thrive, focusing on higher-value analysis. Some may specialize in reviewing third-party data for hybrids or consulting on disputed values.

Here in CA......they're just-not-paying a consummate fee for the work required to provide a decent analysis on said complex assignments. "One of" the reasons why there's no New Blood in this "profession".

 

[Fernando]

I was in downtown SF and coming soon to a building is Flagstar Private Bank. WTF.
Even Flagstar is going into wealth management using government money in speculating for high returns.