Quicken Loans, PHH and loanDepot.com have overtaken US banks to grab a record slice of government-backed mortgages. Regulatory curbs on risk-taking and billions of dollars in fines have forced mainstream providers to retreat from the $9.8tn home loan market. This article plays back some of the findings to a Bank of England report.
So-called shadow banks such as Quicken Loans, PHH and loanDepot.com accounted for 53 per cent of government-backed mortgages originated in April — almost double their share in April 2013. They explained as follows: Shadow banks perform banklike functions such as lending but are subject to lighter supervision because they are funded by professional investors rather than retail depositors protected by government insurance schemes. This is deeply worrying. As a new Working Paper for the Bank of England, published in the last few days, has shown the idea that banks are intermediaries between savers and borrowers is just wrong, in which case the idea that some banks are funded by retail depositors and others by professional investors is also just wrong. As the Bank of England paper says (my emphasis added):