The Mortgage Market is Now Dominated by Non-Bank Lenders

The Washington Post | February 23, 2017         Most borrowers, whether they are purchasing property or refinancing their home, focus on their mortgage rate and loan terms rather than the type of lender they choose. 

Quicken Loans has seized a larger share of the mortgage market but rising interest rates and anticipated deregulation under President Trump could change things. (Uli Deck/picture-alliance/dpa/AP )

Quicken Loans has seized a larger share of the mortgage market but rising interest rates and anticipated deregulation under President Trump could change things. (Uli Deck/picture-alliance/dpa/AP )

Yet the landscape of the lending market has shifted dramatically over the past few years from domination by big banks to a market where more loans are made by non-banks — financial institutions that only make loans and do not offer deposit accounts such as a savings account or checking account. 

“For consumers, it doesn’t really matter whether you get your loan through a bank or a non-bank, although in some ways non-banks are a little more nimble and can offer more loan products,” says Paul Noring, a managing director of the financial-risk-management practice of Navigant Consulting in Washington. “The impact is bigger on the housing market overall, because without the non-banks we would be even further behind where we should be in terms of the number of transactions.”  Read full story here.

Airbnb Income: How It Can Mess With Your Mortgage ‘Refi’

Homeowners who rent rooms are facing additional scrutiny when applying for loans

The Wall Street Journal | August 29, 2016         Room-rental services such as Airbnb Inc. are blurring the line between residential and commercial property. That is causing problems for some homeowners looking to refinance mortgages. (Read what Airbnb hosts need to know.)

Big banks including Bank of America Corp. and Wells Fargo & Co. are subjecting some refinance customers who rent rooms to additional scrutiny. Some borrowers have been told they were no longer eligible for certain kinds of loans or would have to pay higher interest rates, according to the customers.

“This is kind of novel,” said Jeffrey Naimon, a consumer-finance attorney and partner at law firm BuckleySandler LLP. “I don’t think the market has gotten its arms around it.”

The issue for lenders is how to classify loans in the Airbnb age. Historically, that has been easy: A house usually was either a principal residence or an investment property. Mortgages on the latter are often viewed as riskier because owners had less of a personal connection to the house and rental income isn’t always reliable.

Now, the distinction isn’t so clear-cut. Online-rental services are spreading rapidly; Airbnb’s website had 455,223 active listings in the U.S. as of July, up 80% from a year earlier, according to research firm YipitData. That is posing challenges to lenders and frustrating some customers, illustrating how fast-paced technological change can reverberate in unexpected ways.

The issue comes up when borrowers report income from services such as Airbnb when applying for a new loan, often in hope of improving their credit profile. That, they hope, can lead to a better interest rate on a loan.  Read more here.