Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  News  >  Economy & Forex  >  All News

News : Economy & Forex
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance ProfessionalsCalendarSectors 
All NewsEconomyCurrencies / ForexCryptocurrenciesEconomic EventsPress releases

Regulators See Nonbank Mortgage Firms as Potential Risk to U.S. Financial System -- Update

share with twitter share with LinkedIn share with facebook
share via e-mail
0
12/04/2019 | 06:34pm EST

By Andrew Ackerman

WASHINGTON -- Financial regulators identified fast-growing mortgage lending companies as a potential source of instability in the U.S. financial system, while finding that overall risks are moderate.

The Financial Stability Oversight Council, in a report released Wednesday, highlights mortgage companies as a potential vulnerability for the first time, Treasury officials said. The lenders, which aren't regulated as closely as banks, originate and service a growing portion of U.S. home loans.

Other financial risks identified in the report include historically high levels of borrowing by nonfinancial companies and the growth of digital assets such as bitcoin. The council, which includes representatives from the Federal Reserve and the U.S. Treasury, is expected to stop short of recommending specific actions to curb potentially problematic activities.

Instead, the report generally recommends continued coordination among federal and state policy makers to address activities that could harm the financial system.

Since the 2008 financial crisis, banks have pulled away from mass-market mortgages to focus on wealthier consumers. Nonbank lenders such as Quicken Loans Inc. and Freedom Mortgage have filled the void, representing the only route to homeownership for many first-time buyers and moderate-income families.

Postcrisis regulations curb banks and nonbank lenders alike from making the "liar loans" that wiped out many lenders and forced a wave of foreclosures during the crisis. What worries some industry participants is that little has changed about nonbank lenders' structure.

In its report, the council said that those firms have relatively few resources to absorb economic shocks and most lack a stable funding base, instead relying heavily on short-term funding that could dry up in times of stress. Strains in one nonbank lender could cause counterparties to question the viability of others.

"Broader contagion could lead to dislocation in the housing and mortgage markets during periods of stress," according to the report. Among the 25 largest players in the $10 trillion market, nonbanks originated and serviced roughly half of mortgage loans, up from a fraction a decade ago, according to the Treasury.

Separately, the council completed new standards under which insurance companies, asset managers and other nonbank financial firms would be tagged for stricter supervision.

The council also said it would seek to identify risky activities in a sector rather than singling out individual firms. Any new designation would have to be subjected to a cost-benefit analysis.

As recently as 2016, four nonbank firms were designated as systemically important by the risk panel, while the Obama administration also considered applying the label to Wall Street giants such as BlackRock Inc. and Berkshire Hathaway.

The tide shifted with the arrival of the Trump administration. Regulators removed the last of the nonbank financial institutions from enhanced scrutiny in October 2018, when Prudential Financial Inc. was released from federal oversight. MetLife Inc. won its removal in federal court, while AIG and General Electric Co.'s GE Capital shed their labels after they jettisoned major parts of their businesses.

Write to Andrew Ackerman at andrew.ackerman@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BERKSHIRE HATHAWAY INC. 0.44% 335369.01 Delayed Quote.8.54%
BITCOIN - EURO -0.53% 6440.3538 End-of-day quote.93.98%
BLACKROCK, INC. 1.08% 499.23 Delayed Quote.25.73%
FREEDOM HOLDING CORP -0.14% 14.42 Delayed Quote.74.46%
GENERAL ELECTRIC COMPANY 4.22% 11.44 Delayed Quote.44.91%
PRUDENTIAL FINANCIAL INC 1.41% 93.67 Delayed Quote.13.33%
PRUDENTIAL PLC 3.07% 1361 Delayed Quote.-5.96%
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news "Economy & Forex"
10:01aTATA STEEL : 'Tata Steelium' honoured with the CII Award for Customer Centricity 2019
PU
10:00aOil prices rise on OPEC deficit forecast, Fed outlook
RE
09:54aLagarde comments at ECB press conference
RE
09:54aWhite House, Congress Near Spending Deal as Deadline Approaches
DJ
09:53aMTN will defend its views on data prices if case referred to Tribunal
RE
09:50aECB should be 'ahead of the curve' on digital currency - Lagarde
RE
09:49aS&P 500 hits record high as Trump says close to 'big deal' with China
RE
09:46aWorld stocks hit all-time high, tops January 2018 level
RE
09:45aLagarde pledges own style as she unveils broad ECB review
RE
09:40aTSX opens slightly higher, lifted by energy, materials stocks
RE
Latest news "Economy & Forex"