Overall, 2020 was a record year for the real estate finance industry, but not all of them saw the same gains from it, as early analysis of the Home Mortgage Disclosure Act data shows.
Non-banks claimed more market share, and annual origination profits for Spanish, Black and Native American borrowers were weaker than for other groups. This emerges from the first HMDA data from ComplianceTech, Polygon Research and RiskExec.
Given that newly public non-banks sought to see shareholder growth as banks became more conservative on lending in the face of the pandemic, non-deposits took four of the top five slots for single-family lenders last year, compared to just three in 2019.
This development could double the demand for more security and soundness measures for non-banks in the banking sector. This is concerned about how the increasing presence of less regulated non-custodians could affect the broader financial system.
"Non-banks are growing and this is a concern for banking associations," said Anurag Agarwal, founder, president and chief architect of RiskExec.
And since early HMDA data also suggests inequalities persist, there could be more policy choices for that purpose too.
The proposal to extend a version of the Community Reinvestment Act to non-banks could address both issues, Agarwal said.
The rating agency requires banks to provide fair credit in the communities where they make deposits. With non-banks not making deposits, there have been questions about how they could be customized to suit their business models, but this could be something that policymakers could investigate further, he added.
The HMDA data available so far are preliminary and have their limits, as some smaller companies are excluded from the reporting. In general, however, this is widely viewed as a reliable industry benchmark.
What follows are more specific data points and other first insights into the 2020 HMDA numbers from experts who are currently analyzing them.