Observations on life

Lending Shift Spurs Worry Over Risk

You can still get a mortgage with only 5% down and in some cases 3.5% or even 0% for certain military and rural area buyers. Is there any wonder there are risky loans out there? These buyers drive up their monthly premium, spend money on PMI and pay more in interest over time. 

Bonds backed by certain risky single-family mortgages topped $1 trillion for the first time in November, crossing that threshold amid rising warnings for one corner of the housing market.

These mortgages are insured by the Federal Housing Administration and typically go to borrowers with small down payments and lower credit scores. Banks have pulled back from issuing those loans and from packaging them into bonds sold to investors.

The result: In the first three quarters of 2016, banks accounted for 9% of mortgage dollars originated by the FHA’s top 50 lenders, versus 62% for all of 2010, according to Inside Mortgage Finance. Nonbank lenders accounted for 80% of mortgage bonds backed by single-family FHA loans in July 2016, versus 9% the same month in 2010.

http://www.wsj.com/articles/the-mortgage-markets-1-trillion-pocket-of-worry-1484827201

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