As reported in Inside Mortgage Finance on 9/15/17.
Independent mortgage bankers are leading all other lenders in providing mortgage loans to first-time homebuyers, minorities, lower-income borrowers and rural areas, and yet they are more regulated than banks, according to a new industry report.
The report from the Community Home Lenders Association underscores the fact that IMBs are small businesses that don’t have access to federally insured deposits. It claims that IMBs have done a better job of servicing home loans than banks because of their deep roots in the communities they serve. In addition, unlike banks that cross-sell a variety of financial products and services, IMBs are focused on a single product: mortgages.
Nonbank lenders rely on their own capital and on warehouse loans to fund mortgages, rather than federally insured deposits. And because their primary business is mortgage lending, nonbanks were able to keep such credit flowing even as many banks collapsed during the 2008 housing crisis, the report said.
Although nonbanks underwrote some subprime mortgage loans, they accounted for only a small share of the subprime market. Banks and mortgage brokers were largely responsible for the bulk of subprime mortgages that were delivered and securitized, the CHLA noted. For more details, see Inside Mortgage Trends.