December 12, 2019
In the wake of the housing crisis, traditional lenders have become more risk-adverse. There has also been a drop in subprime borrowers — both nationwide and in Texas. These borrowers, instead, are turning to non-traditional lenders for loans. While the state’s mortgage market appears to be stable, a report from the Federal Reserve Bank of Dallas suggests this might not be the whole story.
For example, recent data from the Consumer Finance Protection Bureau indicated independent mortgage companies — “nonbanks” — serve a greater share of low- and moderate-income borrowers than other institutions. Nonbanks tend to be more vulnerable to economic stress than banks; they are also not subject to the oversight of the Community Reinvestment Act.
While the Dallas Fed isn’t yet sounding the alarm, it does point out that “the gradual disappearance of subprime consumers from the mortgage market,” along with the rise in nonbank use for mortgage applications,bears watching.
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