Banks Rediscover Their Homing Instinct. The long-term trend of banks unloading mortgages has reversed, which should bolster earnings but could hurt Fannie Mae and Freddie Mac.

The Wall Street Journal reports:

“Boring” banking appears to be on the way back.

For a long time, banks moved away from the bygone business model of buying and holding mortgage loans. By 2008, they held around 32% of America’s mortgage debt, down from 60% in 1980. That decline accelerated with the onset of the financial crisis, so that even as the absolute dollar value of mortgage debt outstanding fell, the amount held by banks fell even faster.

Pershing Square Capital Management founder William Ackman pointed to this long-term decline in a May 2014 presentation as evidence that “banks will not significantly increase the amount of long-term, fixed-rate mortgages they retain on their balance sheets.” That meant, he said, that Fannie Mae and Freddie Mac would remain central to the housing market.

But by then banks had already quietly begun to rebuild their mortgage portfolios. In absolute-dollar terms, these hit their postcrisis low in the fall of 2013, according to Federal Reserve data, and then began climbing again, albeit slowly.

Notably, banks began adding mortgages to their balance sheets at an even faster pace than the mortgage market has grown. In 2014, the share of mortgage debt held by banks rose above 31% for the first time since 2009, according to Fed data.

Imagine that.