Lenders Profit as Mortgage Market Changes
An Mortgage Bankers Association (MBA) spokesperson said that several independent mortgage companies made extreme changes in their loan product offerings. This includes an increase in writing FHA loans, a category which increased to 45 percent of loans in 2008 from 10 percent the year before. Lenders reported that they closed an average of 56.6 percent of all loan applications.
The Fed has been providing liquidity to the mortgage market in their purchase of Mortgage Backed Securities (MBS). Between August 13 and August 19, the Federal Reserve purchased a gross total of $26.640 billion agency MBS.
The Fed purchased an average of $5.00 billion per day, up from last week’s $4.08 billion per day. This doubled the average daily originator selling, illustrating that the Fed continues to provide a generous supply of liquidity to mortgage bankers looking to hedge their pipelines of committed and uncommitted loans.
We can only hope that the evolving mortgage market swings back to more responsible lending practices, especially in the mobile home market. Manufactured homes ar very difficult to finance and refinance currently, which is a sobering fact among the retired and elderly in America, because they are the majority of Americans being targeted as “risky” by lenders.
Banks were irresponsible with loose lending practices such as “stated income,” but now they are too tight in their lending procedures. Now, there are so few programs, that the entire mobile home mortgage market is at a standstill. With their retirement only a fraction of what it used to be, retired Americans cannot even pull equity out of their manufactured homes. This is because their homes have dropped in value, and lenders look for any reason to decline their loan application.
The moral of the story is that banks were too loose, now their too tight. And America is left asking: WILL LENDERS EVER GET IT RIGHT?
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