Are the small banks being pushed out of mortgage lending?

USA Today reported that with massive financial reform laws are making it difficult for smaller banks to compete in the mortgage lending arena. Some of them simply don’t have the resources to comply with these new rules that add a mountain of paperwork to the transaction.

“I know some bankers that are probably just going to quit making mortgage loans,” Iowa banking superintendent Jim Schipper says. But I can’t help to wonder if these smaller banks and lenders were having fraud or default issues in the past or are they just guilty by association?