Commercial banks are still in trouble. Regulators were initially spurred into action by accusations that six large commercial banks had been hastily processing foreclosures as the housing market collapsed in 2008, using a process known as robosigning that often meant the banks did not adequately check on the accuracy of the documentation. This caused four million homeowners to face foreclosures, and a $10 billion settlement was agreed upon in 2013.
JPMorgan Chase recently was told to pay an additional $48 million to settle remaining issues stemming from missteps in its handling of mortgage servicing accounts after the crisis. The bank already paid $2 billion in a 2013 settlement with the Office of the Comptroller of the Currency (OCC), but it did not satisfy all the obligations of that earlier settlement. (source: http://nyti.ms/1Wf5BOF)
With more penalties likely awaiting other large banks, this certainly will impact their financials to some extent, and the loan amount they can offer to borrowers. This may lead to a rise in nonbank mortgage lenders, who borrow money or have private equity backing (typically from investors or banks) to lend to homeowners, then quickly sell those mortgages and repay their own loans. Among the top forty lenders, nonbanks accounted for 37.5 percent of originations in 2014, and the percentage continues to rise annually. (source: http://nyti.ms/1Wf5BOF) Readers, do you agree that the tightening regulations on commercial banks is allowing nonbank lenders to finance a larger population of borrowers?