Sub-Prime versus Traditional Loans.
August 11th, 2007 . by Mike Kelly
John Theberge of Cal-Bay Morgage passed this along to me this week. We are now experiencing an over-reaction to bad underwriting. I didn’t see the fed releasing money to the folks who are loosing their houses but the minute the “street” starts going south then let’s pull out all the stops!!
NAMB Releases New Trend Data on 2007 Mortgage Markets
Conservative Trend Continues As Market Corrects
Washington, DC – July 24, 2007 – The National Association Mortgage Brokers (NAMB) today released new trend data that shows mortgage brokers continue to close fewer non-traditional or “subprime” loans than in 2006.
The data is part of an ongoing survey of mortgage brokers nationwide that is conducted by NAMB’s research partner Wholesale Access Mortgage Research and Consulting, Inc. The latest update confirms that the trend toward more traditional loans continues to be the norm in 2007 as the market corrects from a decade-long housing expansion.
“This data shows that brokers are anticipating and meeting the changing needs of their customers,” said NAMB President George Hanzimanolis. “The shift in the market toward more traditional loan products is yet another reason we have cautioned Congress not to overreact to existing concerns and allow the market to adjust.”
Prime loans continue to make up the majority of all loans originated by mortgage brokers, according to the study. Though their share of the marketplace dipped slightly in April – to roughly 56%, down from 61% in March – prime loans were still by far the most widely used class of mortgages. In April, only 11% of all loans offered were subprime.
In 2006, 13% of all loans offered were subprime loans, designed for homebuyers with credit scores below 620.
“This ongoing study further puts subprime mortgage issues in perspective,” said Hanzimanolis. “For all the attention that these loans have received in the media, we’re talking about a small – and shrinking – portion of the homebuying market.”
The survey responses came from more than 200 brokers, and were analyzed to compare types of loan products offered, adjustable versus fixed-rate offerings and combined loan to value ratios. To view a chart of these finding, click here.
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The National Association of Mortgage Brokers is the voice of the mortgage broker industry with more than 25,000 members in all 50 states and the District of Columbia. NAMB provides education, certification and government affairs representation for the mortgage broker industry, which originates over 50% of all residential loans in the United States.
Merrill Says Fed to Cut Rates in October on Slowdown (Update2)
By Daniel Kruger
Aug. 6 (Bloomberg) — Merrill Lynch & Co. said the Federal Reserve will cut interest rates in October as the turmoil in the credit markets and falling home prices slow U.S. growth.
The central bank will reduce the target rate for overnight loans between banks by a quarter percentage point to 5 percent, Merrill chief economist David Rosenberg said in a report today. In June, Rosenberg said the central bank wouldn’t lower borrowing costs until next year.
An almost 100 basis point increase in the difference in yields on corporate and government debt, a 15 percent decline in equities and another 5 percent drop in home prices will slow gross domestic product growth to 1.5 percent next year, Merrill said. The firm had predicted GDP of 2.3 percent. Rosenberg’s earlier forecast of a 4.25 percent year-end federal funds rate was among the lowest of economists surveyed by Bloomberg News.
The Fed will cut rates to 3.75 percent “by mid-2008,'’ Rosenberg said today in the report. That would bring the Fed funds rate to the lowest level since October 2005. Merrill is one of 21 so-called primary dealer firms that trade directly with the Fed.
