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Implementing Regulation for Independent Mortgage Banks

How have independent mortgage banks (IMBs) helped low- and middle-income borrowers achieve their dream of homeownership and what housing finance policies can ensure a stable and liquid mortgage market for consumers using these lenders? These were some of the questions that a white paper titled "The Rising Role of the Independent Mortgage Bank - Benefits and Policy Implications," by the MBA sought to answer.

Citing data from the Home Mortgage Disclosure Act (HMDA) the white paper said that there were nearly 900 IMBs across the nation in 2017. They accounted for 16 percent of all HMDA reporting companies, yet originated 54 percent of 1-4 family mortgages - a rise of 25 percent from 2008.

Looking at the current business models being used by IMBs the white paper pointed out that government lending remained the focus for these banks because of which more than 64 percent of minority homebuyers obtained their financing from an IMB in 2017.

Additionally, these lenders originated nearly 59 percent of all home purchase loans for low- and moderate-income borrowers. The average loan amount for home purchases in 2017 that were originated by IMBs was $243,000 compared to $280,000 for federally insured depositories like large banks, indicating that these lenders tend to serve borrowers needing lower-balance loans.

Looking at the regulatory oversight for these lenders, the white paper indicated that the regulatory framework under which IMBs operate had strengthened over the past decade. Federal regulation had ensured that IMBs comply with all the federal mortgage consumer protection rules that apply to banks and other depository institutions. IMBs today are also subject to licensing and supervision in every state. Given this framework, the white paper made policy recommendations to enhance the stability of the housing finance market keeping the expanded role of IMBs in mind. They included:

"Our housing finance system is strongest when the sources of capital are diverse, and risk-taking is predicated on stable loan products and sustainable underwriting," the white paper stated.

Click here [1] to download the white paper.