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Nonbank mortgage providers like Rocket Mortgage could make the next recession worse, federal regulators warn.
New York
CNN
—
US officials worry the next recession could be intensified by a cascading series of failures in the mortgage industry caused by crashing home prices, frozen financial markets and soaring delinquencies.
The US Financial Stability Oversight Council, a SWAT team of financial regulators formed after the 2008 crisis, sounded the alarm on Friday about an increasingly influential corner of the industry that has largely escaped scrutiny: nonbank mortgage companies.
Unlike traditional banks, nonbank mortgage companies are heavily exposed to swings in the mortgage market, depend on funding that can dry up during times of stress and don’t have stable deposits to rely on as a safety net. And, unlike banks, these companies are lightly regulated at the national level.
FSOC warned that these unique vulnerabilities risk a domino effect in a future crisis where multiple…
