Recent research shows that as banks step back from offering risky loans, non-banking lenders have stepped in to fill the breach. Though banks once ruled the mortgage sector in the U.S, they now have less than a 50 percent share.
According to the latest figures, the amount of mortgage dollars offered by traditional banking institutions dropped in the third quarter of 2016. With many non-banking lenders willing to take on potentially riskier loans, these newer facilities provided 51 percent of the home loan lending.
It is not the first time that independent home loan lenders have edged closer to offering a 50 percent share of the market, but in recent history, they have never topped traditional sources of capital. This was the case even in the run-up to the financial crisis last decade and the housing bust that eventually occurred. It means that the shift in lender reflects a significant change for the most important consumer credit sector in the U.S.
The trend shows that banks remain wary of risky lending, with many large institutions wanting to heed caution. Many banks continue to be fearful of regulatory and legal threats, which have already cost them tens of billions in dollars relating to mortgage settlements and fines. This fear has made it increasingly hard for many consumers to access home loans, but the resulting gap in the market has made it possible for non-banking lenders to take some of the risk themselves. How this may affect the market in the years to come is anyone’s guess, but the potential for homeownership may have become easier for some people.
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