Big banks are phasing out mortgage lending, particularly for lower-income buyers, just as "non-bank" independent mortgage companies are increasing lending activity.
According to the Consumer Financial Protection Bureau, non-banks currently originate 56 percent of all home loans. Quicken Loans originated 27 percent more loans last year than Wells Fargo, its closest competition. Big banks have claimed that they are originating fewer FHA loans based on previous penalties from the Department of Justice, while critics argue that the banks are abandoning low-income buyers in favor of more lucrative market segments, CNN reports. Economists have voiced concern about the rising lending volume of non-banks, as their levels of risk, and ability to absorb losses are unclear.
Banks have been walking away from low-income homebuyers seeking loans, and that has affordable housing advocates worried. Newly-released federal data on mortgage lending from the CFPB shows people with low- and moderate-incomes made up only 26.3 percent of borrowers in 2017, down from 36.6 percent in 2009. In part, that's due to federal rules that sought to crack down on the subprime lending tactics that helped bring on the financial crisis. Also, skyrocketing housing costs have locked many people of modest means out of the market.