Federal Reserve Vice Chair for Supervision Michelle W. Bowman outlined a strategic focus on revitalizing the banking sector’s participation in mortgage origination and servicing during remarks delivered at the recent American Bankers Association 2026 Community Bankers Conference.
Bowman identified a long-term shift of mortgage market activity away from banks to nonbank firms, as a concerning trend that carries implications for financial stability, consumer choice and industry resilience.
Drawing on data showing that banks’ share of mortgage origination declined from roughly 60% in 2008 to about 35% by 2023 — and their share of servicing dropped from about 95% to roughly 45% over the same period — Bowman signaled the Federal Reserve’s willingness to consider regulatory changes aimed at recalibrating capital rules that influence bank incentives.
“We welcome Vice Chair Bowman’s remarks today outlining a path toward revitalizing bank participation in mortgage lending," said Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB. "Her recognition that aspects of the current capital framework have discouraged banks from competing for mortgage origination and servicing activity is an important step forward. A more appropriately calibrated approach, particularly with respect to mortgage servicing rights and mortgage loans, will strengthen banks’ ability to serve creditworthy borrowers while maintaining safety and soundness."
A central focus of Bowman’s discussion was the treatment of mortgage servicing rights (MSRs) — the expected value of income from servicing a mortgage after it is securitized. She noted that post-2013 capital rules may have inadvertently discouraged banks from engaging in origination and servicing by imposing risk-weight standards and deductions that make these activities more costly relative to their actual risk profiles.
To address this, Bowman outlined two forthcoming regulatory proposals that would:
- Remove the requirement that mortgage servicing assets be deducted from regulatory capital (while retaining a high risk weight and soliciting public comment on the appropriate treatment), and
- Increase the risk sensitivity of capital requirements for mortgage loans on bank balance sheets — for example, by tying risk weights more closely to loan-to-value ratios rather than applying a uniform weighting.
Bowman emphasized that these steps are intended to foster greater bank participation in mortgage activities without compromising safety and soundness, and that broader engagement across regulatory frameworks — potentially including Consumer Financial Protection Bureau rules — could also play a role in restoring a more balanced mortgage market.
"MBA is eager to review the forthcoming proposals and engage through the formal comment process, and we stand ready to work with the Federal Reserve and other regulators to advance a balanced framework that supports sustainable mortgage origination and warehouse lending, robust servicing capacity, and continued access to affordable home financing,” added Brokesmit.
