Quicken Loans, which has become the No. 2 retail home mortgage lender behind Wells Fargo, and its founder and chairman Dan Gilbert get the third degree in a New York Times piece by Julie Creswell, 50-plus paragraphs that seem to look for and infer they'll lead to a "smoking gun."
The roots of the story, whose most scandalous conclusion is that Gilbert overreacted and lashed out when he didn't receive a reply to his texts to Creswell, mistakenly sent to her landline rather than her cell phone number, have basis in growing worry that banks have largely exited the Federal Housing Administration home loan business, leaving non-banks like Quicken to take up the slack. Which they have.
Nondepository institutions such as Quicken are held to different--less draconian and, perhaps, less safe--regulatory compliance. Which is not to say they're free of scrutiny, as HousingWire's Trey Garrison reports here.
Worry has grown up around this issue of such a huge percentage of FHA loans being at risk. Wall Street Journal finance writer AnnaMaria Andriotis' piece last Thursday conjured days of a decade-ago insanity in her report on the fact that bonds backed by FHA loans topped $1 trillion in November, focusing specifically on the non-bank lending surge in FHA-backed mortgages. She cues up the story noting that banks have largely declined to play in the FHA mortgage arena, a function of their increased risks and liabilities in the wake of Dodd-Frank regulation:
The result: In the first three quarters of 2016, banks accounted for 9% of mortgage dollars originated by the FHA’s top 50 lenders, versus 62% for all of 2010, according to Inside Mortgage Finance. Nonbank lenders accounted for 80% of mortgage bonds backed by single-family FHA loans in July 2016, versus 9% the same month in 2010.
Now, this New York Times story matters on a couple of levels, one of them being the boy-who-cried-wolf issue.
Importantly, media should take care not to conflate success in an intense sales-driven culture in home lending into wrong-doing. That Quicken Loans and its Rocket Mortgage service zero in on enormous pain and frustration points for borrowers should not be taken, by their nature and the current market traction they've gained, as implicitly suspect or "shadowy," as Times reporter Creswell infers in her piece.
In the years since the financial crisis, Quicken has emerged as a leader in the nation’s shadow-banking system, a network of nonbank financial institutions that has gained significant ground against its more heavily regulated bank counterparts in providing home loans to Americans.
Creswell surmises that because the company is leading a pack of mortgage lenders who aren't held to the same level of scrutiny banks are, that there must be chicanery afoot, and that articles like hers are necessary or else the whole trillion-dollar FHA-backed complex will come crashing down, just like 2007.
Yes, perhaps the risk-reserve tolerances among non-bank institutions are too obscure, and that may warrant further probing.
However, nothing Dan Gilbert is doing or has done seems to have merited such an aggressively negative take--at least nothing revealed in the New York Times piece by Julie Creswell.
She may know more than she's been able to report here, but that remains to be seen.
As reported, however, it comes across as an assault on a guy with a quick temper, but who's heart--look at all the good he's doing in Detroit--and vision are in the right place.
The point is there may be increasing risk as nonbanks make more than 9 out of 10 FHA-backed loans. But this example of reporting on the issue is not going to help reducing the risk, because it infers culpability without proving anything.
