Non-bank FHA Lending
Non-banks, financial institutions that are not full-service (do not offer both lending and depositing services), accounted for 83 percent of all new FHA loans in fiscal 2016, according to The Washington Post.
In 2014 over 40 percent total loan originations (in terms of dollar volume) came from non-banks, compared to only 12 percent in 2010, according to a 2015 working paper from Harvard. Furthermore, of the 40 largest servicers, 16 were non-banks, which accounted for 20.5 percent of the total market and 28 percent of the outstanding top 40 servicing balances, compared to eight percent in 2010.
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The paper notes that FHA loans backed 100 percent by the government now account for a disproportionate share of non-bank originations. The proliferation of such loans could result in system-wide risk by increasing default rates that in turn could bring about counterparty risk.
Last Updated on January 24, 2017 by Ramin Seddiq