MReport May 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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52 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Access to Mortgage Credit to Diminish due to COVID-19? Stricter lending practices not seen in nearly a decade could return. A nalysis by the Urban Institute says the CO- VID-19 health crisis is beginning to "constrict the mortgage credit box" similar to what happened during the period following the Great Re- cession from 2010 to 2013. "In the wake of the 2007–09 Great Recession, it was hard for people with less-than-perfect credit to secure a mortgage. This stood in stark contrast to the years leading up to the financial crisis when it was too easy to se- cure a mortgage," the report said. However, in response to the Great Recession, restrictions and risks through regulations caused lenders to become wary of lend- ing to borrowers with "anything less than pristine credit." The report adds that for the past six years, Fannie Mae and Freddie Mac, along with the Federal Housing Administration, have made strides in expanding the credit box to borrowers. Urban Institute states that as of March, people with credit of 720 and above are locking in mortgage rates that are as much as 78 basis points lower than borrowers with credit scores of 660 and below. "Particularly within the nonbank space, having a better credit score corresponds with a mortgage rate that is as much as 83 basis points lower than for a borrower with a weak credit score," the report said. "These spreads between low and high credit scores are much wider than they were before the pandemic." The most recent drop in mortgage rates benefits borrow- ers with higher credit scores. For purchase loans, borrowers with credit scores of 660 or below saw a 14 basis-point drop between November and March, while borrowers with scores of 720 or above experienced a drop of 30 basis points. Freddie Mac's latest Primary Mortgage Market Survey found the average rate for a 30-year fixed-rate mortgage was at 3.31%. "Mortgage rates continue to hover near all-time lows for the third straight week. As a result, refinance activity remains high, but home purchase demand is weak due to economic tightening," said Sam Khater, Freddie Mac's Chief Economist. Khater continued, "While new monthly economic data are driv- ing markets lower this week, they are a lagging indicator and should be priced in already. Real-time daily economic activity metrics suggest that the economy will likely not decline much further. Going forward, the key ques- tion is no longer the depth of the economic contraction, but the duration."

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