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As the housing market sputters along, many big banks are shifting their emphasis to products such as student loans, credit cards, or commercial lending – because they can make more money with those products. Fewer residential mortgages are being approved, and that has sent many consumers in search of alternative sources of cash such as private lenders.“Private lenders are not subject to the same federal regulations that banks that borrow directly from the Federal Reserve system must comply with,” explains Meghan Robinson, CEO of Sunovis Financial. “As a result, lenders like Sunovis can set their underwriting standards. Oftentimes that means more leeway for borrowers who may have credit problems related to the long recession, but still do not really represent a risk of default.”
New residential construction is lackluster, and although home prices have improved the volume of sales is not impressive. So, as explained in a recent article published by Forbes (http://www.forbes.com/sites/greatspeculations/2014/09/12/q2-2014-banking-review-outstanding-loan-portfolio/), the growth of lending in the United States has not been smooth or equal across the board. While some major banks have reported as much as 5% annual growth in loans, others are not faring as well. The biggest banks in America all have a huge stake in the credit card market, for example, which brings in billions of dollars in revenues for those huge banking institutions. They are also making forays into the attractive market for student loans. But many are still saddled with troubled mortgage loans acquired through during the subprime mortgage crisis. As a result, Bank of America’s reliance on mortgages have lessened, for instance, and its residential mortgage portfolio has been steadily shrinking over the past few years. Over at U.S. Bancorp, commercial loans outweigh mortgage loans, too, as it has strategically positioned itself to take advantage of strength in the commercial sector while reducing exposure in rather a stagnant mortgage arena.
Evidence of this trend away from mortgages is that first-time home buying is in a disturbing slump. Usually first-time buyers are the fuel behind a sustained and prosperous real estate bull market, but that demographic was responsible for only 33% of home purchases this year. According to the National Association of Realtors that is the lowest figure since 1987 – when the stock market experienced an historically devastating crash. That’s why private lending in the mortgage niche has surged in the wake of the big bank mortgage crisis. Private lenders may be smaller, but that means they also have greater flexibility – that can be an advantage to the borrower in a lending environment characterized by tight credit.
“The hard fact is, it is not easy to qualify for a mortgage right now,” acknowledges Robinson. “Even Ben Bernanke, the former Federal Reserve Chair, had his mortgage refinance application rejected by his bank. But at Sunovis we always try to work with people in a creative solution that will meet their needs, rather than just denying them because they don’t meet a certain standard.”
Contact Info:
Name: Meghan Robinson
Email: Send Email
Organization: Sunovis Financial
Address: 7500 College Blvd
Website: http://sunovisfinancial.com
Release ID: 73156
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