By Veronica Dagher and Nicole Friedman

If you wanted to get a home loan in recent years, there is a good chance you looked past a bank like JPMorgan Chase or Wells Fargo and went to a mortgage company like Rocket or Pennymac. These nonbank lenders now handle most U.S. home loans.

But that could change as Washington aims to get banks back into the mortgage market.

The proposal

Many big banks stopped focusing on mortgages after the 2008 financial crisis, because new rules essentially required them to set aside more money to cover potential losses from mortgages.

In 2008, banks originated around 60% of mortgages and serviced about 95% of mortgage balances. As of 2023, banks originated 35% of mortgages and serviced 45% of mortgage balances, according to the Federal Reserve.

Michelle Bowman, the Federal Reserve's vice chair for supervision, outlined a plan Monday that would reduce the amount of money banks are required to set aside to originate and hold mortgages.

The plan would let banks hold less money to cover losses if a borrower puts down a bigger down payment. It would also change how mortgage-servicing rights -- the right to manage a loan and collect payments -- are treated on a bank's balance sheet, freeing up money for banks to grow their mortgage businesses.

The Fed's reasoning

Unlike traditional banks, nonbank mortgage companies lack safety nets like the ability to take out emergency government loans during a crisis. Traditional banks are also diversified businesses with more financial cushion, which typically allows them to be more flexible when borrowers hit a rough patch.

During the pandemic, for instance, borrowers with bank servicers were more likely to receive forbearance on their mortgage payments than those with nonbank servicers, Bowman said in a speech Monday.

Isaac Boltansky, head of public policy at Pennymac, said nonbank lenders have successfully navigated volatile interest-rate cycles.

Nonbank lenders are primarily regulated by the states.

How rates stack up

Mortgage rates remain elevated compared with a few years ago at around 6.1%, keeping home purchases unaffordable for many would-be buyers.

Banks and mortgage companies were recently offering roughly the same rates, according to data from Optimal Blue. Those rates don't factor in fees, which can vary significantly among both bank and nonbank lenders.

What it might mean for home buyers

Big banks such as Chase, Bank of America, Wells Fargo and Citigroup have millions of customers they can sell mortgages to. The proposed changes are likely to mean nonbank lenders will lose market share to banks, said Jaret Seiberg, an analyst at TD Cowen.

The increased competition would be welcomed by Bowman, who said in her speech that consumers have been hurt by reduced competition as banks pulled out of the market.

Even with the proposed rules, regulators would likely need to reassure banks that they won't be subject to fines and scrutiny if they jump back into the mortgage business, said Ted Tozer, a fellow at the Urban Institute who ran Ginnie Mae for seven years after the financial crisis. Tozer sits on Pennymac's board.

This explanatory article may be periodically updated.

Write to Veronica Dagher at Veronica.Dagher@wsj.com and Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

February 18, 2026 12:00 ET (17:00 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.