Mortgage industry thinks the party is over

The Mortgage Bankers Association (MBA) has been meeting this week in rain drenched Florida. We’re starting to see some news feeds from the meeting, two interesting articles earlier this evening.

Group: Mortgage Lending to Fall in 2006

Mortgage lending in the United States is expected to drop 18.7 percent in 2006 as borrowing costs rise, cutting into the demand for housing and mortgage refinancings that helped drive the real estate boom, a mortgage banking industry trade group said on Tuesday.

The Mortgage Bankers Association, at its annual meeting, said it estimates mortgage lending will drop to $2.26 trillion in 2006 from this year’s expected $2.78 trillion.

The expected drop in mortgage lending likely will coincide with fewer home sales and will slow down the pace at which home prices rise, the group said.

Also out of the meeting were some statements about the types of loans generated in the first half of this year. Scary, very scary.

Demand for riskier mortgages up-MBA

Interest-only and option adjustable-rate mortgages have grown popular as lower payment alternatives to traditional ARMS, said Jay Brinkmann, the MBA’s vice president of research and economics.

With an IO, the borrower pays only the interest due. In an option ARM — also called a negative amortization loan — the borrower can pay less than the interest due, effectively raising the amount of the mortgage.

The MBA said ARMs, excluding IOs, fell to 36 percent of new loans in the first half of the year from 46 percent in the last half of 2004. IO loans rose to 23 percent from 17 percent and Alt-A products grew to 11 percent from 8 percent.

Later, the share should turn higher when a large number of hybrid ARMS are reset or refinanced, the group said. Some $1 trillion in loans will be available for reset in 2007, said Duncan.

Here is another link with some more detail:

Real estate loan originations up

The vast majority of loans (88 percent) in the first half were for owner occupied homes, but the percentage of loans for non-owner occupied properties was significant (12 percent). This finding is consistent with the 2004 Home Mortgage Disclosure Act data, which revealed that more than 11 percent of 2004 originations were for non-owner-occupied properties.

Caveat Emptor,

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18 Responses to Mortgage industry thinks the party is over

  1. Anonymous says:

    The Party is over. It’sonly began for this corrupt industry.

    I would expect class action lawsuits against this industry in the future. Can’t imagine all the shenanigans that occurred in the past several years to get an idiot in a house.

  2. Richie says:

    Yes; I still get these great emails though. I’m glad the mortgage industry doesn’t care about what their affiliate marketers are saying to promote their products:

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    $525,000 for $595 a month? Is that a 100 year mortgage?


  3. grim says:

    Mortgage applications fall, MBA says

    Mortgage applications still falling.


  4. RentinginNJ says:

    Off Topic – but interesting.

    The family in the article purchased a 2,400 sq. ft. home 3 years ago and now must cook meals in the microwave because they can’t afford to use a natural gas stove. It talks about how the trend toward bigger home is going to hurt when it comes time to pay the heating bill.

    Star-Ledger – Bigger They Are, Harder The Heat Bill

  5. Richie says:

    That’s just silly, cooking in the microwave to avoid using the stove? The fear of “rising home prices” has scared too many people into buying pieces of property that they can’t afford. If they rented, they were in a much better position. There was a very small window where you could have bought a home for a good price and then refinance when the rates tanked.

    The people who made out were the people who bought their homes cheap, and refinanced at 5%, all the other suckers got the shaft.

    Hmm, lemme see. Rent a 1000sq ft apartment for $1000/month, or have a mortgage payment+taxes of $3000 for a 2000sq/ft home. DO THE MATH.



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