It is rumored that changes to capital requirements imposed on banks for mortgages will lead to increased mortgage rates, and a shift in mortgage volume from traditional banks to non-banks. Such changes could also lead to a reduced appetite within the Mortgage Servicing Rights (MSR) market. This has been a concern amongst executives, analysts and trade groups in the real estate sector.

The impacts of the rumored changes will likely have a significant effect on the mortgage industry. This is because of the higher credit costs that will be imposed on banks, which in turn will make it more expensive for them to originate mortgages, resulting in higher rates for borrowers. Additionally, banks may become more strict with their lending requirements, which may lead to fewer mortgages being originated. In an effort to offset the higher costs and to reach more borrowers, banks may look towards non-banks, such as broker networks and FinTech lenders, to pick up where they may have left off. Furthermore, the market for MSRs may face decreased demand due to the increased costs from banks, with the resulting increase in the cost of servicing loans.

Important Elements:
• Banks capital requirements for mortgages could increase
• Higher mortgage rates
• Mortgage volume shifting to nonbanks
• Reduced appetite for MSRs
• Higher credit costs for banks
• Stricter lending requirements from banks
• Nonbanks likely to pick up some of the slack
• Increase in cost of servicing loans

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