TheMReport — News and strategies for the evolving mortgage marketplace.
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FEATURE "Without a job, how does one qualify for a mortgage to buy a home? Obviously, they don't. And the actual unemployment rate is a great deal larger than the rate published by the federal government." — Joseph Badal, Joseph Badal & Associates changes was likely to be small. For example, according to the analysis, about 1.3 percent of both the 2010 home-purchase and refinance loans fell into a size range affected by the proposed limit changes for Freddie Mac and Fannie Mae. Although the affected num- ber of loans is small relative to the total number of loans, the analysis also showed the number is large relative to the current jumbo loan market. • All the loans reported in the 2010 HMDA data were covered under new rules governing whether a loan is classified as higher priced. The data show the incidence of higher-priced lending across all products in 2010 was about 3.2 percent. As in the past, black and Hispanic-white borrowers were more likely in 2010, and Asian borrowers less likely, to obtain loans with prices above the HMDA price-reporting thresholds than were non-His- panic-white borrowers. These differences are significantly reduced, but not completely eliminated, after controlling for lender and borrower character- istics. • Analyses of the HMDA data in previous years have consis- tently found that denial rates vary across applicants grouped by race or ethnicity, which is also the case in 2010. However, the HMDA data do not in- clude sufficient information to determine the extent to which these differences reflect illegal discrimination. • Loan approval data—loans fell by about 1 million while applications dropped almost 2 million from 2009 to 2010— suggests that higher-quality credit standards and tighter lending was the rule rather than the exception in 2010. The Fed analysts used data from a national credit bureau to highlight the importance of house price declines and changes in underwriting relative to earlier in the decade for refinance activ- ity during 2010. "We estimate," they wrote "that, in the absence of home equity problems and underwrit- ing changes, roughly 2.3 mil- lion first-lien owner-occupant refinance loans would have been made during 2010 on top of the 4.5 million such loans that were actually originated." Lending Shrinking, Attitudes Shifting T he lending market, according to Cecala, is contracting. "Tough lending conditions are pushing a number of large and mid-size banks to reduce or eliminate mortgage lending, par- ticularly in the wholesale chan- nel," he said. "They also have encouraged a lot of small banks and credit unions to launch or step up their mortgage lending activity. The number of small banks and credit unions now actively promoting mortgage products—particularly jumbo loans—has surged over the past two years." "The HMDA data shows a clear and definitive trend in the housing and mortgage indus- tries," according to Joseph Badal, CEO, Joseph Badal & Associates. Badal, the one-time CEO of Thornburg Mortgage Home Loans Inc., a publicly traded mortgage company, noted a changing attitude reflected in the HMDA data. "There continues to be a distinct lack of confidence in the U.S. housing market, with a bias toward continued softness THE M REPORT | 27