US Treasury Secretary Janet Yellen said regulators are monitoring the risks of non-bank mortgage lenders, warning that some of them could fail if market distortions occur.
“Unlike banks, nonbank mortgage companies do not have access to deposits, so the Financial Stability Oversight Council (FSOC) is paying close attention,” Yellen said at a Senate Banking Committee hearing on Monday.
Although non-banks have a large presence in the mortgage market, they rely on short-term financing options. Nonbanks are also not allowed to access the Federal Reserve’s emergency lending facility, known as the discount window.
“Nonbanks rely on short-term funding, which is less stable than deposits, and their lines of credit can be drawn down in times of stress,” Yellen said in response to a question from Democratic Representative Cortez Masto. “In a stressful market environment, there is concern that one of them will go bankrupt,” he said.
news-rsf-original-reference paywall">Original title: Yellen Eyes Nonbank Mortgage Lenders, Warns of Possible Default (excerpt)
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