Regional Banks Expanding Mortgage Operations

In the midst of all the pain wrought by the mortgage meltdown, some regional banks believe they see an opportunity to expand mortgage operations, the American Banker is reporting. Encouraged by the reduced competition, small and mid-sized banks are being as aggressive in expanding mortgage desks as they have been in a decade.

Some small banks such as Iowa's American Banks and Trust and AmericanWest Bank in Washington state are hiring mortgage brokers away from larger banks stung by the mortgage turmoil, including Washington Mutual and Countrywide Financial.

One executive at Pennsylvania's American Home Bank rattled off a list of reasons why the mortgage paradigm has shifted in favor of banks, including a steady deposit base as a source of funding, preemption from licensing requirements, the ability to outsource secondary-market execution and reliable funding through the Federal Home Loan Bank System.

Some regional banks are seeking the kind of loan pricing available to bigger players like Wells Fargo and Bank of America. To help them, they are joining forces and selling loans through Fannie Mae and Freddie Mac, the paper said.

That might create some alliances that could lead to consolidation when competition heats back up. But for now, smaller banks looking far ahead enough to position themselves for a recovery. When and how strong that recovery will be is another question.