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Efforts to revive the depressed real estate market are creating opportunities for home buyers, homeowners and the banks that missed out on the fun during the last housing bubble.

Big banks are buried under an avalanche of paperwork, as homeowners have rushed to refinance at record low interest rates and first-time home buyers have tiptoed back into the market, lured by depressed home prices and an $8,000 tax credit.

These banks -- already spread thin after undergoing massive layoffs in the past 12 to 18 months -- also must work with scores of borrowers who are having trouble paying their existing mortgages, observers say.

Many small banks that traditionally did not do a lot of mortgage lending or that did not have large market share in their local markets are finding opportunity in the chaos. Robert Braswell, the CEO of

Carolina Bank Holdings


, a community bank in Greensboro, N.C., says that larger rival banks "are not even answering the phone or returning a phone call."

"We're getting a lot of additional opportunities ... and so consequently we in turn are able to provide that service," Braswell says, adding that purchase loans are taking priority.

US Bancorp

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originated $13.5 billion loans in the first quarter and had applications in for roughly $25 billion worth of loans, according to a recent presentation.

CEO Richard Davis said in the presentation that the majority of loans are refinances, with a large portion from more stressed credits. The company is also spending a "great deal of energy" on reducing loan rates, reducing principal amounts and keeping loans from defaulting, he said.

Still, the process for securing a loan is growing longer, frustrating borrowers, loan officers, mortgage brokers, realtors and others in the industry. Stricter underwriting standards delay loan processing, as additional confirmation, documentation and quality-control requirements are causing mortgage brokers and loan officers to take on "a lot more work to get the same loan done," says Mark Goldman, a real estate professor at San Diego State University, who also works as a mortgage broker

Banks, on average, are taking double the amount of time to process loans -- in some cases causing borrowers to pay for mortgage-rate extensions due to longer closings, some say.

TowerGroup research director David Hamermesh says lenders are shifting employees from the servicing end of the business to loan modification work, which "helps to ease some of the pain but not enough of it." Bank of America, for one, recently said it is hiring 6,000 mortgage-related employees.

A rash of acquisitions late last year has provided another challenge on top of it all for the biggest banks, which much integrate systems and personnel. Last year, several large lenders were acquired, including

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Countrywide Financial

, which was bought by

Bank of America

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Washington Mutual

purchased by

JPMorgan Chase

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acquired by

Wells Fargo

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; and

National City

, bought by

PNC Financial Services

(PNC) - Get PNC Financial Services Group, Inc. Report

, among others.

"What has really hit the headlines is consolidation at the top of the mortgage industry for lenders," Hamermesh says. "That consolidation as well as some lenders going out of business really opened up an opportunity for lenders to take market share. We've seen a number of types of players take advantage of that," including large and small banks and even credit unions.

Many banks have scaled back or discontinued wholesale lending, as the once-critical securitization markets have dried up and

Fannie Mae



Freddie Mac


became nearly the only outlets to which banks can sell loans. This further reduces the avenues for borrowers and mortgage brokers to access loans.

"Now there is a deluge of mortgages and there is nobody to close them," Goldman says. "The number of banks

in the wholesale mortgage business is probably down 60% to 70%."

Carolina Bank expanded its wholesale mortgage business in the past two years, despite the housing meltdown.

"It has been one of the best things I have ever done," Braswell says. "We've got folks who are working nights and weekends to keep up with the volume."

Still, Braswell says another reason why the company is gaining share is because it is able to sell most loans -- as long as they are not jumbo in size -- to Fannie Mae, Freddie Mac and other government agencies.

Steve Jacobson, founder and president of Fairway Independent Mortgage in Sun Prairie, Wisc. says mortgage brokers like his company must "be faster

and quicker" than banks to compete.

"We're all battling the same issues," he says. "Do you have enough people to handle the calls coming in? Do have enough capacity on the warehouse lines? ...

Everybody is kind of juggling depending on their own company."

Like other firms, the majority of Fairway's business is refinancing right now, but the firm is giving priority to mortgages for purchasing homes and looking to close loans within 60 days as opposed to less than 30 days a year earlier. Jacobson says his firm is in position to do $3 billion worth of mortgages this year compared to $1.97 billion in 2008.

Jacobson adds that the firm is better able to gain relationships with local realtors and customers as many big banks have centralized their mortgage operations.

"We definitely feel the difference on the purchase side," he says. Large banks aren't "necessarily concerned with the relationships, whereas we're in the local marketplace ... we may be able to build a long-term relationships. It gives us a definite opportunity to get to know the people."

Still, the opportunity smaller competitors see in the rise in origination activity should not be taken as a sign things are returning to normal.

"We're not anywhere near the normal mode where people are buying houses at normal prices and we are qualifying them for normal new mortgages," US Bancorp's Davis said in the investor presentation. "We are a long way from that."