2016-10-26 — wolfstreet.com
These shadow banks dominate in mortgages that are insured by the FHA and the VA, including no-down-payment and low-down-payment mortgages for buyers with subprime credit ratings, the riskiest mortgages out there. Thus, FHA and VA backed loans have jumped from 6% of all purchase originations in 2006 to 30% in Q3 2016.
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It is largely via this conduit of the shadow banks that the nationalization of the riskiest end of the mortgage industry is proceeding. It has now become completely dependent on government guarantees.
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But there is no risk, we hear constantly. Defaults are at a record low. Same as just before the last housing bust.
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