Financial lenders, not banks, dominate the mortgage market, rules must be agreed – YubaNet



Financial technology lenders (financial technology), officially called non-banks, now dominate the residential mortgage market in California and the United States, according to a new report from the Greenlining Institute. But these businesses are not subject to the same rules as banks, which means that their positive potential may be outweighed by the risks of discrimination and threats to the stability of the financial system and the housing market.

A Fair Financial System: Regulating Fintech and Non-Bank Lendersreleased today describes these risks and proposes new approaches to regulation at both the state and federal levels.

“Since 2009, the US mortgage market has changed radically,” said study lead author Ravan Elhalabi, senior manager of the Greenlining Institute’s Economic Capital Program. “Two-thirds of mortgage loans are issued not by banks, but by fintech lenders who are not required to follow the same rules as banks. We know almost nothing about their lending schemes and whether they discriminate or not, and there are reasons to be concerned about their stability. It’s time for financial regulation to be true. “

Key findings from the report include:

  • Fintech lenders now prescribe two-thirds of US mortgages, up 660% from market share since 2009. All three of California’s top mortgage lenders are non-banking organizations.
  • We don’t know how this industry shift is affecting communities and color borrowers due to a lack of transparency and reporting requirements. In particular, fintech lenders that do not have branches and do not accept deposits are not subject to the Federal Community Reinvestment Law, the landmark redline law designed to encourage banks to invest in underserved communities.
  • All of this is happening as traditional banks close branches in low- and middle-income areas, effectively abandoning their CRA obligations. This has led to an increase in the market share of non-bank households among blacks and Hispanics.
  • The lack of transparency and reporting requirements raises serious questions about the financial soundness of fintech lenders. There are several comprehensive federal regulations for non-bank mortgage lenders who tend to have little cash and large amounts of debt.

The report offers several policy recommendations to address these challenges, calls for Congress to modernize the Community Reinvestment Act to reach financial lenders, and calls for action quickly. The report describes how states such as California can enact state-level regulations, including requiring more transparency in lending through the Department of Financial Protection and Innovation, and enacting the government’s version of the Community Reinvestment Act. In Illinois, the last state to pass a state CRA, lawyers collaborated with legislators to promote a plan for racial equality that included these important rules for non-bank lenders.

“State and federal regulations need a major overhaul to keep pace with these trends and avoid a new financial crisis brought on by predatory mortgage lending,” said Debra Gore-Mann, president and CEO of The Greenlining Institute. “These institutions target communities that have historically been denied access to the financial products and services of traditional banks. If they are not further regulated, this house of cards will fall on the black and brown communities in the first place. “

To learn more about the Greenlining Institute, visit

INSTITUTE GREEN LINING works towards a future where communities of color can create wealth, live in healthy places filled with economic opportunity, and are ready to tackle the challenges of climate change.


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