Lending standards declined sharply before the financial crisis. There is strong evidence that lending standards generally loosen during prosperous times, and that permitting financial institutions to compete with each other for revenue and market share by lowering standards lead to a "race toward the bottom." There is also strong evidence that the expansion in mortgage lending including subprime lending, and more generally lending in lower income census tracts, was disproportionately fueled by lightly regulated non-bank independent mortgage lenders. There is also evidence that areas served predominantly by independent lenders saw sharper increases in foreclosure rates.
