Are the "Nonbank Lenders Staging a Comeback?" According to Lynnley Browning of The New York Times, they are. Though some nonbank lenders still offer higher risk loans with unreasonably high rates, but some, such as LendingTree and Quicken Loans sell fixed rate or adjustable-rate loans that are a lot cheaper than those of big banks.


Who are these people?
Many people are suspicious of these smaller, nonbank lenders, but, according to Glen Corso, the managing director of the Community Mortgage Banking Project (a trade group of 43 nonbank lender), "these are mainstream loans with good pricing." Already there has been an increase in business, and the total value of loans made by Guaranteed Home Mortgage, a nonbank lender in White Plains, N.Y, is up from 15% to 20%.

 How much lower are the rates?
Because of their small size, and therefore lower cost to operate, nonbank lenders can offer rates that are 0.125 to 0.375 percentage points below those offered by major banks.

How do nonbank lenders extend money?
Nonbank lenders extend money in one of the two following ways:

1. They pass the money from their line of credit with big banks to the consumers in the form of home loans.
2. They collect money from private inventors to lend to consumers. 

Consumers should be careful about the second way because interest rates may be significantly higher.

 

However, with all the seemingly beneficial aspects of nonbank lenders,
Diane Thompson, a lawyer at the National Consumer Law Center, advises home buyers to stick with a bank. “There’s a long track record which indicates that this is where consumers will get the best deal,” she said.