Shelter Six:  Looser Mortgage Guidelines Leading to More Home Sales

July 2, 2018 by · Leave a Comment 

1. A recent CoreLogic analysis of Conventional loans revealed that looser Fannie Mae / Freddie Mac mortgage guidelines are leading to more loans being approved.

2. As Fannie and Freddie have promoted more 3% down programs, the share of Conventional purchase loans with < 5% down has surged from < 2% in 2014 to 9% in the 1st Qtr of 2018.

3. Also, as Fannie and Freddie have allowed for higher debt ratios, 20% of all loans in the 1st Quarter of 2018 had a debt ratio over 45%, up from only 5-7% in 2012.

4. Despite more loans being approved, the average Conventional credit score has remained unchanged at 755 from the 1st Quarter of 2018 compared to the previous year.

5. A big reason that the Federal Reserve has been raising short-term rates over the last year is that inflation has moved higher in recent months.

6. After holding steady around 1.5% for nearly a year, the Core PCE Price Index spiked up the last 3 months and in May was 2% higher than a year ago, the largest increase since 2012.

Rate Update

There were few surprises with last week’s economic data and mortgage rates fell slightly.

This Week

The mortgage markets will close early on Tuesday and all day Wednesday in celebration of Independence Day.  The ISM National Manufacturing Index will be released on Monday, the ISM National Services Index on Thursday, and Employment figures on Friday.