The New Face of Risky Borrowing

Risky borrowing is making a comeback, but this time traditional banks are out of the picture.

The New York Times reports that funds have been bypassing traditional banks in favor of “shadow banks” which rose up after the financial crisis to fill the gap left by newly regulated banks.

With almost $15 trillion in assets, the shadow-banking sector in the United States is roughly the same size as the entire banking system of Britain, the world’s fifth-largest economy.

With roughly 50 million residential properties, and $10 trillion in amassed debt, the American mortgage market is the largest source of consumer lending on earth.

Lately, that lending is coming from companies like Quicken Loans, loanDepot and Caliber Home Loans. Between 2009 and 2018, the share of mortgage loans made by these businesses and others like them soared from 9 percent to more than 52 percent, according to Inside Mortgage Finance, a trade publication.

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