I want to share some insight from FBR's Paul Miller:
"We expect the private market share to rise, mortgage rates to increase, and homeownership levels to decrease as the focus shifts to affordable rental housing. Overall, we believe the best-positioned companies in this debate are the large money center banks, like Bank of America (BAC – OP) and Wells Fargo (WFC – MP), while small servicers could see profit margins squeezed and lower normalized ROEs on new mortgage insurance business being written."
GSE reform also comes amid new regulation for risk retention in the mortgage market. The expectation is that borrowers will be required to make larger down payments for the best deals. Essentially, borrowers will shoulder more of the risk so banks don't have to.
More from Miller:
"Every player in the mortgage market will be impacted by the sweeping regulations coming their way. Both small and large banks will have their profit margins squeezed as servicing fees drop and guarantee fees rise. That said, we believe that the large money center banks that benefit from economies of scale, like Bank of America and Wells Fargo, are the best positioned to weather the regulatory and economic changes while small originators and servicers will likely find it hard to compete under the new rules."
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