But how and when smaller banks expand their mortgage presence depends what the U.S. government decides to do with the two government sponsored enterprises (GSEs).
New York Community Bancorp (NYB) CEO Joseph Ficalora said his bank will take advantage of the opportunity as the housing market opens up to private competitors by "originating more loans, including jumbo loans for insurance companies, credit unions and banks." New York Community originated $10.8 billion in loans with revenue of $183.9 million last year, he said.
Ficalora is one of numerous CEOs that discussed the opportunity in the mortgage industry during the American Bankers Association Community Bank Investor Conference last week.> > Bull or Bear? Vote in Our Poll Regulators are currently evaluating ways to eliminate the GSEs role in the mortgage market, a difficult task given the fact that Fannie and Freddie guarantee over half of all U.S. mortgages. So far the Obama administration has put three options on the table to overhaul Fannie and Freddie. The first option would have the government back private mortgages, and the second would limit assistance to borrowers through agencies like the Federal Housing Administration. The third option would essentially make the government a reinsurer of mortgage investments that are made by private insurers. In all three scenarios community banks could benefit, said First California Financial Corp. (FCAL) CEO C.G. Kim at the ABA conference. "There are two major growth areas: the mortgage bank and wealth management areas," Kim said, adding that First California purchased more than $50 million in home mortgage loans in the third and fourth quarters of 2010. "We will be looking for acquisition opportunities in the $500,000 range in these areas." Robert Davis, executive vice president of the ABA, said that the government's plan to create another entity to take the place of Fannie and Freddie was like, "creating a new horse to pull the same cart." He argues that the best way to help return the mortgage industry to profitability and make it attractive to the private-sector is to raise "guaranty fees."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV