The subprime crisis and meltdown took down many institutions in the 2007-2009, while also destroying the credit of numerous consumers of such, damaging investors that were fooled into buying securitized packages, devastating home values, and overall becoming a disaster for the American public. Since that time, changes and laws have been made so as to preclude such an event in the future, but in reality, greed has overtaken caution, and a similar crisis is brewing.
For instance, as reported by the washingtonpost.com, in 2011, the top three banks went from providing 50 percent of mortgage loans to consumers have since seen that reduced to 21% in 2016, so that currently six out of the top ten mortgage providers are not banks, but non-banks such as Quicken Loans and PennyMac Financial Services, which have increased their corresponding market share considerably since 2011.
From a competitive perspective, you might think that this is a good thing, to see that banks finally have some real competition in providing the biggest loan that a typical individual will ever have in their life, but banks have special capabilities that they can draw upon, that non-banks do not, as well as banks typically have ready access to capital, whereas non-banks typically look to offload their loans to Fannie Mac and Freddie Mac, which seems like something that we have already previously experienced and that ended very poorly.
Banks are in the business of making money, and part of the way that a bank makes money is to take the time to perform their due diligence in regards to the ability of the loan borrower to pay back the money loaned, of which, there are several steps that a bank can go through to assure themselves that their default rate will not exceed a certain low level. So that if banks have changed their game plan so as to go after specifically the best and the brightest, this means that those that don't have such pristine credit, or that don't have a substantial or prudent down payment, will have to look for other sources, of which, fortunately or not, non-banks have filled well that void.
The thing is that banks are able to utilize the Federal Reserve when they are cash strapped, as well as the fact that bank deposits are protected by the FDIC. On the other hand, non-banks, depend upon their access to capital being abundant and plentiful, as well as the fact that they typically sell their loans to governmental agencies such as Fannie Mac and Freddie Mac, so as to free up more cash to make more loans, but if and when that cash runs low, non-banks will have to turn to their competitors, which are banks for ready cash, to wit, those banks and the cost of money would in times of crisis, cost a lot more, or even not be available for loans.
Banks got burned in the mortgage crisis of a decade ago and have since then made adjustments to their loaning standards, on the other hand non-banks have pounced upon the perceived lack of service to certain borrowers with their main play being to sell off their loans to governmental backed institutions and thereby book that profit. The quality of these non-bank loans have not been significantly tested, and certainly have not been tested in a recession-like economy, of which, when that time comes, it won't end well.