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These 2 BofA Charts Show Mortgages Aren't Coming Back

housingwire.com | April 29, 2014

By Jacob Gaffney

Despite anecdotal reports of lenders lightening up requirements, mortgage credit has not really loosened at all.

In their Securitization Weekly Overview, Bank of America Merrill Lynch bond strategists Justin Borst and Chris Flanagan, mention Federal stimulus as trying to get lending going. Their two charts of what's happened since the Fed began its withdrawal from the mortgage bond and Treasurys markets show that mortgage credit is still way tight. And the charts extend back years, for historical reference.

"Obviously, the Fed has done enormous work to lower interest rates and help interest rate sensitive sectors such as housing. This metric gauges how much bang for the buck the Fed is getting," they write.

"As can be seen, the ratio had been rising prior to last year’s taper talk but has since stalled at what are still extremely low levels."

Chart

Even in the warmer weather Borst and Flanagan don't predict a big boost this Spring.

A big part of the lessening in mortgage credit is not just explained by the Fed withdrawal. The FHA market share is also collapsing.

"We see that FHA has lost significant share of the purchase market over the past two years, dropping from almost 40% share in 2012 to the most recent value of 22%," they add. "The introduction of 80 basis points of additional mortgage insurance premiums on FHA mortgages between November 2010 and April 2013 likely contributed to this decline in share."

This leads to the conclusion that  once abundant pipeline for first time homebuyers is now drying up.

"We view this as a particularly important part of the story, as it suggests that the ability to pass the torch on housing to borrowers at the low end of the credit spectrum, including first time home buyers, may be more constrained than aggregate affordability measures would indicate," the strategists conclude.

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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