Small lenders play an important role in residential financing [Video]
Posted on Wednesday, September 23, 2015 at 9:56:45 AM
In 2014, large banks ceded a sizable portion of the mortgage lending market to nonbanks and community institutions as they continued attempts to insulate themselves from government regulation.
Federal government data released on Sept. 22 indicated that these small lenders accounted for 47 percent of mortgages in 2014, up from 43 percent in 2013, according to the Wall Street Journal. They also were responsible for 42 percent of refinancing loans last year, an 11 percent year-over-year increase.
This is because the larger banks who were hit with massive penalties and heavy regulations following the financial crisis have backed away from all but borrowers with the highest of credit scores, leaving plenty of space for smaller lenders to make their mark.
The data also showed that homeowners are reluctant to refinance these days. Mortgages made in 2014 plunged 31 percent year-over-year, and that is mostly due to a 55 percent drop in refinances. Residential financing for new homes, meanwhile, increased 4 percent from 2013 to 2014.
The influx of nonbank and community lenders into the mortgage market could lead to a loosening of credit standards, the Wall Street Journal explained. A number of lenders have indicated they expect credit requirements to ease up over the next three months.