Oct. 2015 - Diversified We Stand, Divided We Fall

TheMReport — News and strategies for the evolving mortgage marketplace.

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38 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ORIGINATION THE LATEST Mortgage Credit Access Tightens Up in Q1 Despite tightening in Q1, access to mortgage credit is two-thirds of the way back to pre-crisis levels. G etting a mortgage has been progressively getting easier since 2012; however, the first few months of this year indicate credit is tightening and obtaining a mortgage is no easier than it was a year ago. The Zillow Mortgage Access Index (ZMAI) quarterly report found access to mortgage credit tightened in the first quarter of 2015 and is almost unchanged from a year ago. According to Zillow, in a survey this summer of more than 100 economists and housing experts, more than 60 percent said they expect mortgage regulations to loosen further, with many expressing concern the market will become too lax over the next year. Access to mortgage credit im - proved in Q1, reaching 65, and is over two-thirds of the way back to 2002 pre-crisis levels, Zillow says. The ZMAI uses seven variables to measure access to credit: Credit Score, debt-to-income ratio, pri - vate mortgage insurance, second mortgage prevalence, non-con- forming loans, mortgage rate spread, and Zillow mortgage quotes. "Recent market volatility is caus- ing some lenders to be more cau- tious in their underwriting," said Zillow Chief Economist Dr. Svenja Gudell. "Tighter mortgage access will make it harder for people with low credit scores to get a home loan, and even people who can get approved for a mortgage will have fewer options in terms of available mortgage products." In August 2004, mortgage credit was easiest to obtain when the ZMAI reached 136.8. Following this period of loosening credit, availability tightened over the next few years. By May 2007, both housing and mortgage availability began to fall, leaving home values down more than 22 percent and credit the tightest in recent his - tory. Credit hit it lowest point in September 2010, when the ZMAI was at 11.8. "Despite fluctuations from quar - ter-to-quarter, there has been little progress toward making mortgages easier to obtain over the last year," the report said. "In the long-term, experts expect mortgage access to continue improving." Mortgage Fraud Risk Is Lowered by Operational Enhancements, Fitch Reports NEW LEGISLATION, ALONGSIDE CHANGING INDUSTRY PRACTICES ARE RESULTING IN LOWER INSTANCES OF SEVERAL TYPES OF FRAUD. M ortgage fraud risk is being lowered by changes in residential origination practices and new regulation. According to a Fitch Ratings report released in early September, since the financial crisis, risk of fraud and misrepresentation have declined. "A key driver behind the poor performance of the peak vintage collateral was weak operational controls for the information used in the loan decision process," Fitch said. "The industry as a whole, through its own initiatives, investor demands and regulatory mandates, has created a new lend - ing paradigm that has improved the quality of the information and should result in lower credit risk." Much of the mortgage fraud risk improvement is credited to legislative changes, Fitch reported. National standards for non- depository loan officer licenses were introduced for the first time in 2008. These standards required officers to complete a written test, education courses, and a "A key driver behind the poor performance of the peak vintage collateral was weak operational controls for the information used in the loan decision process."

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