Is Subprime Mortgage Credit Back?

April 19, 2014

Great reads from Nick Timiraos over at the Wall Street Journal:

Five Questions on the State of Mortgage Lending

Mortgage Lenders Ease Rules for Home Buyers in Hunt for Business

His central point is that the mortgage market is starting to direct credit toward lower credit quality buyers.

We still think that the mortgage market remains pretty conservative, especially compared to the auto and credit card loan market. House prices have risen sharply, especially out west, and many first-time potential buyers are priced out of the market.

There are many who think the mortgage market is excessively tight, but that isn’t obvious. The key question remains: can potential buyers service the payments on the large mortgages they need to buy pretty expensive homes?  Logan Mohtashami is a loan manager in southern California who argues that income levels do not justify a lot more mortgage lending given how high prices are. His views are worth checking out: (@LoganMohtashami).



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One Response to Is Subprime Mortgage Credit Back?

  1. Logan Mohtashami on April 19, 2014 at 2:34 pmi

    There is no tight lending in America today or has been the last few years. The problem with loan demand is that Americans Debt to Income, Liability to Income are too high. Also, their liquid asset availability is too light. This is especially true for first time home buyers

    Last year Bloomberg Financial asked me in an interview to debate Ben Bernanke thesis that QE velocity was poor because lending standards are too tight. I believe 100% that this is incorrect as all you need in this country today and the last 6 years is this to buy a home

    1. 620 Fico Score
    2. 3.5% down payment
    3. Debt to Income level of 43% and this could even go higher

    Our family has been in the mortgage business for over 30 years and we can’t say with a honest face that lending standards are too tight

    My interview on Bloomberg Financial on this topic