A new set of non-bank mortgage lenders are popping up in California, joining the list of largest lending firms in the nation and giving borrowers an alternative source of home loans.
These mortgage lenders, which include PennyMac, AmeriHome Mortgage and Stearns Lending, are covering four out of 10 home loans, in the country, as per The Seattle Times report. But because they have ties to former subprime lenders, which have already closed down, consumer advocates are concerned that they may take advantage of borrowers once again.
According to The Seattle Times, these new mortgage lenders, with headquarters in South California, are all under the leadership of Countrywide Financial former executives -- the company which was once a big name in risky loans that played a role in 2008's financial crisis.
Although these executives promise that their new companies are following stricter lending rules, there are still valid reasons to be worried because of the current housing market heating up and house prices soaring high across the United States. In addition, Federal Housing Administration (FHA) mortgages from non-bank lenders are becoming more delinquent compared to mortgages from banks. This is according to an analysis of Los Angeles Times, which also indicate the 23 percent chances for FHA and Veteran Affairs loans going bad compared to banks' loans.
Kevin Stein, associate director of the California Reinvestment Coalition, a fair-lending advocacy group in San Francisco, said "The idea that a lot of the folks who benefited during subprime are now back in action calls out for closer scrutiny."
While banks are required to have more stash of cash, non-bank lenders do not have such reserves that will enable it to survive in case of a housing crisis, KOB4 reported. This would likely result in more borrowers being unable to pay their mortgages and eventually losing their homes.
