Fearful of regulations and expensive penalties, banking is backing away from traditional mortgages.
According to Inside Mortgage Finance, banks loaned less than half of all mortgage dollars in the third quarter of 2016. This is the first time in 30 years that banks and credit unions have not taken the lead in mortgage lending.
Traditional banks have shied away from making mortgages insured by the Federal Housing Administration. This follows a series of costly lawsuits brought by the federal government surrounding these loans in the last few years, according to The Wall Street Journal.
Non-bank lenders, such as Quicken Loans, have stepped into the market snapping up borrowers with less than pristine credit.
Meanwhile, banks have concentrated on jumbo loans (those more than $417,000 in most parts of the country) because they are considered less risky both financially and legally, according to The Wall Street Journal.
