Risky Borrowing Sees A Return But Without Banks
There’s an increase in risky loans but what’s different is that unlike prior to the Great Recession is the risk isn’t being assumed by banks. Instead, it’s sources outside of the banking industry that are assuming the risk, according to the New York Times.
The article observes, “It’s called shadow banking, and it is a key source of the credit that drives the American economy. With almost $15 trillion in assets, the shadow-banking sector in the United States is roughly the same size as the entire banking system of Britain, the world’s fifth-largest economy.”
In certain areas — including mortgages, auto lending and some business loans — shadow banks have eclipsed traditional banks, which have spent much of the last decade pulling back on lending in the face of stricter regulatory standards aimed at keeping them out of trouble.
The article says With roughly 50 million residential properties, and $10 trillion in amassed debt, the American mortgage market is the largest source of consumer lending on earth.
Lately, that lending is coming from companies like Quicken Loans, loanDepot and Caliber Home Loans. Between 2009 and 2018, the share of mortgage loans made by these businesses and others like them soared from 9 percent to more than 52 percent, according to Inside Mortgage Finance, a trade publication.
