Guest Post by Anthony Sanders
At last. Residential mortgage (1-4 unit) lending is almost back to zero percent growth!
It has been a tough time for mortgage lenders since the passing of Dodd-Frank and the creation of the Consumer Financial Protection Bureau (CFPB). The Urban Institute has this chart showing that the absence of risky loans in the economy is the answer.
Now, hold on one second! I am unclear as to how Laurie Goodman and company define “risky,” but low down payment loans are more risky than 20% down payment loans empirically. I don’t know if the Urban Institute counts 3-5% down payment loans as risky in their chart.
Why mention loan down payment lending? Because Fannie Mae and Freddie Mac are the primary purchaser of single-family mortgages since the housing bubble burst. The FHA is an insurer, not a loan purchaser.
Here is some empirical evidence from Fannie Mae mortgage-backed securities (MBS). Here is the average loan-to-value (LTV) ratio for Fannie Mae 4% coupon MBS:
At least for 4% coupon Fannie MBS, the average LTV is higher now than during the housing bubble! So much for the story that Fannie and Freddie are “too tight” with mortgage credit.
Now, in terms of credit (FICO) score, Fannie 4% coupon MBS is higher today than during the housing bubble. But it continues to decline.
But how low should Fannie and Freddie expand (drop) their FICO box? It is like a raccoon riding on the back of an alligator. The raccoon hopes that the economy doesn’t tank and home prices fall (again).
Housing Starts Plunge 11% As April “Bounce” Fades, Permits Soar To 8 Year High
Submitted by Tyler Durden on 06/16/2015 08:40 -0400
Following April’s hope-filled spike in Housing Starts and Building Permits SAAR (and the exuberant jerk to 10 year highs in NAHB Sentiment), May data is more mixed. Housing Starts plunged 11.1% MoM (against expectations of a 4% drop) missing for the 3rd of last 4 months. Permits, on the other hand, spiked 11.8% (againmst expectations of a 3.5% drop) smashing the hope to its highest since August 2007. So – in summary – hope is soaring, reality is falling and all the hope is based on America as ‘rental nation’ with a record number of multi-family unit permits.