For borrowers, making a decision about which lender to choose when financing their home can be difficult. Not only is the choice of selecting a specific lender a hard decision, but one of the biggest choices before narrowing in on a specific lender, is deciding whether to finance through a bank or through a non-bank.non-banks-01

“In the wake of the financial crisis, non-bank lenders and servicers have witnessed a significant emergence in the mortgage business. In fact, independent mortgage banks (IMBs) are heavily dominating the single-family market. The IMB share of overall mortgage originations has increased from 25% in 2008 to 40% in 2013, according to MBA’s own research,” according to Bill Cosgrove, chairman of the Mortgage Bankers Association, in his article posted on Housing Wire.

So why are non-banks or independent mortgage banks thriving in our post collapse housing market:

  • Exclusivity – Unlike depository banks, non-banks only use their funding for mortgages. Not personal loans, not deposit products, not business loans – nothing other than home loans.


  • Regulations – Unlike banks, which operate under one license throughout a variety of states, independent mortgage banks, or non-banks, are required to have licensing for each and every state in which they operate. The state regulators review all financial statements, balance sheets and data on origination and servicing, quarterly.


  • Monitoring – Non-banks’ activity is overseen by warehouse banks, as well as government agencies such as: Fannie Mae, Freddie Mac, Ginnie Mae and FHA.