I have two questons about loan application data. 1. Is there any way to estimate how many apps are turned down? and 2. Do turned down applications still count in the applications totals? I can imagine a situation where tightening causes an increase in applications because applications are turned down and borrowers are persistent. This scenario might also seriously weaken the quality of loans issued by less selective lenders.
so, cr, what do you think? Have we flattened out? If this was a prediction market, what would you bet for another 10% decline in mortgage apps before years end (say, over a 4 week basis).
It depends, usually in the winter, they have a tendency to be a bit weak, but I expect a strong rebound next spring and possibly a return to record setting highs by next summer.
As far as I see it, if there are "record setting purchases" by summer, homebuilders will start building furiously. Which will put more earnings in their coffers but will obviously not help the inventory overhang.
In fact, if you could assure homebuilders that there would be strong purchases, they would rapidly increase housing starts (perhaps to 2m per yr again).
The more confident they are today, the lower the home price equilibrium will end up in the future. Becuase there will be more empty houses.
Good for affordability for high school kids today I guess.
Holy sockpuppet, Batman. It's too damned early in the morning for me to have to deal with a fake CR. Can't you sociopaths go mess with some other blog?
An awful lot of noise in this week-to-week data. You would think mortgage originations would be helped by the recent (more down weeks then up) drop in interest rates.
Also I suspect there will be a market for very long term loans to bail out the option-ARM and ARM crowd. Probably not a ton of money in a fixed 50, but it could help the lenders a little bit.
When Federal Regulators told the banks to stop getting involved in payday lending the results were almost immediate. But they caught that Gene as it was coming out of the bottle, and none of the big players were involved. This situation is much more involved and will probably take a little longer for the "advisory" to take effect.
I came across a website that has data on home mortgage lending activity and mortgage insurance activity data from private mortgage insurance companies.
To Bill--the mortgage application numbers are just that, applications. The MBA does not track how many are actually turned into originated loans; I asked them that very question. The government office in charge of enforcing fair housing laws does track that information, but the data they make public is a year-by-year summary, not by week like the MBA figures. On the other hand, they also track demographic information like ethnicity, location, and income. Not too surprisingly, from 1999 to 2004, the percentage of applications that were accepted increased substantially, especially at the lower-income levels, corresponding to all the anecdotal evidence of lowered lending standards (and raw numbers of applications increased as well). I wouldn't think that stricter standards would necessarily stop people from applying, at least at the outset, until it became generally clearer that standards were tightening.
so far all I see is 10 flat months. The awaited decline is so far just that, awaited.
May be we'll see the impact of the guidelines in the coming weeks, but so far it s hard not to admit that it s taking awful lot of time.
One of my points is not that tighter standards would stop people from applying. Rather, that some people may apply several times before getting a loan or giving up. This would potentially inflate the application numbers.
One fact you have to keep in mind is that the MBA data only accounts for half the market. The question is, which half? I have assumed the lenders that aren't members supplying data are the lenders like H&R Block, nostly subprime, etc. Maybe Tanta or someone else knows this?
If my guess is correct, a pop in MBA numbers could be partly people refinancing with loans with better terms, coming from more reputable lenders.
There are certainly many people who are stuck with resetting ARMs with poor terms and repayment penalties. Then there are those who took advantage of extremely low ARM rates over the past few years and were careful to take on a loan without a prepayment penalty. Rates on a 30-year-fixed loan are really only about .6% above where they were at the low point in 2003.
I have a separate question from mortgages. On a day like today, when Alcoa has missed expectations, oil prices are up and North Korea is threatening us with force, and the market isn't falling very much, you do have to wonder what's going on.
Paul Van Eeden (a gold analyst) claims that companies will issue over a trillion dollars in corporate bonds this year (by far a record), and that they are using the money to buy back shares and prop up their stock prices. Do you agree that this could be the cause of the market's strange activity? What is the long term effect of this? Was this a common practice when you were in business?
"Greenspan, speaking at a conference in Calgary today, pointed to a "flattening out" of weekly mortgage applications after they went down "very dramatically."
But but....lol. Greenspan is a moron. You would think of all people he would look at longer term 'trends' rather then one good report to draw conclusions.
About a week ago, the MBA explicitly confirmed what you suspect. A big chunk of refi is ARM-to-ARM or ARM-to-conventional to avoid disadvantageous resets or otherwise improve loan terms.
Jason M, borrowing money to buy back shares makes no sense to me ... but I've seen some strange proposals, so nothing surprises me anymore.
With regards to market action, I take the simple view - I think most investors are bullish and think the economy will have a soft landing. Back in August, I wrote: "... if there is a soft landing, the markets will probably do reasonably well."
I think a soft landing is the consensus view right now.
Does anyone beside me think that a noticeable effect of the suggested lending guidance changes will be to drive the better-quality lenders farther away from subprime borrows, or at least to whip up a lot better CYA-quality disclosure forms? The first reason would be fear of being sued by said borrowers-turned-victims, whose lawyers would claim, correctly, that the regulators fired a warning shot that should have been heeded. The second would be to find a stonger position when the who-buy-back-what-paper exercise increases dramatically in tempo.
I have two questons about loan application data. 1. Is there any way to estimate how many apps are turned down? and 2. Do turned down applications still count in the applications totals? I can imagine a situation where tightening causes an increase in applications because applications are turned down and borrowers are persistent. This scenario might also seriously weaken the quality of loans issued by less selective lenders.
so, cr, what do you think? Have we flattened out? If this was a prediction market, what would you bet for another 10% decline in mortgage apps before years end (say, over a 4 week basis).
It depends, usually in the winter, they have a tendency to be a bit weak, but I expect a strong rebound next spring and possibly a return to record setting highs by next summer.
Edited: Note from real CR .... this post was from Lenny, as was the post from "AC".
As far as I see it, if there are "record setting purchases" by summer, homebuilders will start building furiously. Which will put more earnings in their coffers but will obviously not help the inventory overhang.
In fact, if you could assure homebuilders that there would be strong purchases, they would rapidly increase housing starts (perhaps to 2m per yr again).
The more confident they are today, the lower the home price equilibrium will end up in the future. Becuase there will be more empty houses.
Good for affordability for high school kids today I guess.
CR-
I just thought it was David Leahrah trying out new material for book number 3.
Holy sockpuppet, Batman. It's too damned early in the morning for me to have to deal with a fake CR. Can't you sociopaths go mess with some other blog?
Well, it looks as if the worst may be over for housing...
Oh, wait.
An awful lot of noise in this week-to-week data. You would think mortgage originations would be helped by the recent (more down weeks then up) drop in interest rates.
Also I suspect there will be a market for very long term loans to bail out the option-ARM and ARM crowd. Probably not a ton of money in a fixed 50, but it could help the lenders a little bit.
When Federal Regulators told the banks to stop getting involved in payday lending the results were almost immediate. But they caught that Gene as it was coming out of the bottle, and none of the big players were involved. This situation is much more involved and will probably take a little longer for the "advisory" to take effect.
Bill -
I came across a website that has data on home mortgage lending activity and mortgage insurance activity data from private mortgage insurance companies.
On-Line Reports
To Bill--the mortgage application numbers are just that, applications. The MBA does not track how many are actually turned into originated loans; I asked them that very question. The government office in charge of enforcing fair housing laws does track that information, but the data they make public is a year-by-year summary, not by week like the MBA figures. On the other hand, they also track demographic information like ethnicity, location, and income. Not too surprisingly, from 1999 to 2004, the percentage of applications that were accepted increased substantially, especially at the lower-income levels, corresponding to all the anecdotal evidence of lowered lending standards (and raw numbers of applications increased as well). I wouldn't think that stricter standards would necessarily stop people from applying, at least at the outset, until it became generally clearer that standards were tightening.
so far all I see is 10 flat months. The awaited decline is so far just that, awaited.
May be we'll see the impact of the guidelines in the coming weeks, but so far it s hard not to admit that it s taking awful lot of time.
Altanta Renter and Moopheus:
Thanks for following up on my question.
One of my points is not that tighter standards would stop people from applying. Rather, that some people may apply several times before getting a loan or giving up. This would potentially inflate the application numbers.
Last week's good number made Greenspan to pee with boiling liquid.
So, after this week bad numbers his device will be frozen?
This guy may hurt himself...
Dear Host,
The fiscal 2006 budget figures are out. Just thought you might like to know....
One fact you have to keep in mind is that the MBA data only accounts for half the market. The question is, which half? I have assumed the lenders that aren't members supplying data are the lenders like H&R Block, nostly subprime, etc. Maybe Tanta or someone else knows this?
If my guess is correct, a pop in MBA numbers could be partly people refinancing with loans with better terms, coming from more reputable lenders.
There are certainly many people who are stuck with resetting ARMs with poor terms and repayment penalties. Then there are those who took advantage of extremely low ARM rates over the past few years and were careful to take on a loan without a prepayment penalty. Rates on a 30-year-fixed loan are really only about .6% above where they were at the low point in 2003.
CR --
I have a separate question from mortgages. On a day like today, when Alcoa has missed expectations, oil prices are up and North Korea is threatening us with force, and the market isn't falling very much, you do have to wonder what's going on.
Paul Van Eeden (a gold analyst) claims that companies will issue over a trillion dollars in corporate bonds this year (by far a record), and that they are using the money to buy back shares and prop up their stock prices. Do you agree that this could be the cause of the market's strange activity? What is the long term effect of this? Was this a common practice when you were in business?
Thanks for your thoughts.
JM
"Greenspan, speaking at a conference in Calgary today, pointed to a "flattening out" of weekly mortgage applications after they went down "very dramatically."
But but....lol. Greenspan is a moron. You would think of all people he would look at longer term 'trends' rather then one good report to draw conclusions.
Bob_in_MA,
About a week ago, the MBA explicitly confirmed what you suspect. A big chunk of refi is ARM-to-ARM or ARM-to-conventional to avoid disadvantageous resets or otherwise improve loan terms.
Jason M, borrowing money to buy back shares makes no sense to me ... but I've seen some strange proposals, so nothing surprises me anymore.
With regards to market action, I take the simple view - I think most investors are bullish and think the economy will have a soft landing. Back in August, I wrote: "... if there is a soft landing, the markets will probably do reasonably well."
I think a soft landing is the consensus view right now.
Best Wishes.
Does anyone beside me think that a noticeable effect of the suggested lending guidance changes will be to drive the better-quality lenders farther away from subprime borrows, or at least to whip up a lot better CYA-quality disclosure forms? The first reason would be fear of being sued by said borrowers-turned-victims, whose lawyers would claim, correctly, that the regulators fired a warning shot that should have been heeded. The second would be to find a stonger position when the who-buy-back-what-paper exercise increases dramatically in tempo.
Above post was from me -- clicked "send" before adding my name.
"I think a soft landing is the consensus view right now."
It maybe the consensus view, but it was the consensus in 1929.
Interesting read about a 24 year old flipper in trouble. I wonder how many more of them are out there suffering in silence?
A would-be real estate mogul follows boom tips straight to bust
Read his blog:
For example
For example
amazing, simply amazing ... it s tech boom all over again.