Gone Missing: 1.1 Million Loans

Analysts from the Urban Institute recently put a hard number on tight credit. The company says that lenders failed to make about 5.2 million mortgages between 2009 to 2014 because of rigid underwriting standards. An additional 1.1 million mortgages could have been processed in 2015 “if reasonable lending standards had been in place.” All in all, 6.3 million mortgages that might have been disappeared over that six-year period.

UI says that since the 2008 housing crisis, borrowers with less than stellar credit have found it hard to obtain a mortgage. Purchase mortgages declined from 4.6 million in 2001 to 3.5 million in 2015 because of exceptionally high standards. Among the strictures facing less creditworthy borrowers are:

  • “Overlays” or additional restrictions, above and beyond FHA and GSE requirements, that lenders put on borrowing because of concerns they may be forced to repurchase failed loans from guarantors.
  • The high cost of servicing delinquent loans
  • Concerns about potential litigation over imperfect loans.

UI says tight credit continues to frustrate borrowers, lenders, and policymakers, but modest progress has been made. The Federal Housing Finance Agency (FHFA) has taken many steps to address overlays, as has, to a far lesser extent, the FHA. The numbers of 2015 loans that “went missing” however, “supports the urgency of continuing regulatory and other reforms that will make mortgages more accessible to all creditworthy borrowers.”

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I finally found out what’s the word for extra restriction on top of Fannie and Freddie requirements: overlays. Mortgage bankers like Wells don’t just follow Fannie requirements, they actually put on extra rules, in case Fannie reject their applications later and they have to let the loans sit in their books.

It’s one area Trump can help. Obama has been too slow to relax the rules. As a result many people of lesser means missed out on the recovery.

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UI concludes that, while recent FHFA and FHA policy adjustments have helped modestly to expand the credit box, their recent analysis shows there is still much to be done. “These missing loans don’t just mean 1.1 million families are deprived of sharing in the critical wealth-building opportunity of homeownership. Fewer home sales also mean fewer construction jobs and lower sales of consumer goods that homebuyers purchase when they move into their new residence. Ultimately, this loss slows the entire US economy.” They say the impact of this tight credit environment will reverberate for years to come.

This is some excellent analysis! Thanks for posting it. We need something in the middle between 2006 standards and today’s.

Typical government overreaction. .Like generals preparing for the last war…The over regulation screwed the very people they were trying to help…Creating the greatest opportunity for landlords on history. .Some of us used this knowledge for great benefit. .But the majority of homebuyers were screwed…Tight credit was supposed to punish the banks…instead it slowed the recovery and helped elect Trump…The stock market is telling us that this straitjacket will be removed and a boom is coming…I have been betting on this and have several sfhs to sell into the boom…

Ahhhh, 100% true statement.

wellsfargo is very conservative, grilling me till frustration, finally agreed to provide me refi after around 90 days ! Again, it was a deal for me !

When mortgage rates are increased, people’s eligibility (and thereby competition) is reduced that will not continue the boom.

If stocks are going up and up when FED is increasing the rate, we should be cautious as that will surely result into correction in coming years.

At that time, cash is the king and the waiters, mostly experienced investors, will get a deal !

They won’t keep raising rates unless there’s wage inflation though. Wage inflation means people can afford higher payments. There’s NEVER been a year where rates were increased and home prices decreased.


I was telling FED may raise around FEB 2017, but the chances look high this month, next week. It is a pure guess work, no reliable information.

I suspect this time as 1) Election is over 2) Trump is supportive of rate raise 3) Stocks are going Crazy 4) Jobless is reduced continuously. Inflation has not gone, this is the only exception. However, FED is very likely to consider rate hike as it is almost an year over of rate hike.

“There’s NEVER been a year where rates were increased and home prices decreased”: True, it takes time. Same thing for stocks, it takes time, but stocks are faster to react than real estate.

It’s for sure that Fed will raise rate this month. Question is how many times they will raise in 2017.

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There will always be gap between Total Sales vs Mortgage as there are 30% cash buyers are involved every year. It can not be assumed that all sales are resulting into mortgage. I do not think that original article has addressed or accounted full cash offers.

You seem to be selling houses regularly… you’ve that many?

I have one in contract in Stockton. And my Discovery Bay house has an offer, at a loss… I have been a flipper since 1976. Currently holding the rest…But more inclined to buy than sell…

If you kept all the houses you flipped before 1980, and do nothing else, will you be better off than today?

Probably, but I was in the business of buying, flipping and building new…Would had no cash flow, without selling…If your day job pays the bills then buying and holding may be the best way to go…But buying on margin, I made huge returns…Made plenty of mistakes, but have enjoyed the ride…Besides before 1980 I had very little money…In fact I didnt make big money until the huge boom from 1995 to 2000…And in 1995 I was heavily in debt…


Made plenty of mistakes ====> Experience

Very intersting point. Most of the people on the forum did not make much money in RE until the huge boom from 2011 to 2016.

History repeats. I’m not sure when we’ll get another boom like 2011-2016 or 1995-2000. I guess that 2011-2016 is much better than 1995-2000, right?

Do not dream repeating your success of 2011-2016 ride. It’s a once in your lifetime event.

It’s not because of our smartness, it’s because of our luck the history presents to us.

For me 1995-2000 was much bigger and better…Prices tripled. …Plus loans were easy to get …From 2009-2016 I couldn’t get loans…paid cash…lost the benefit of leverage. .I am set for a downturn in 2017…no debt…But there is a possibility that 2017 will actually see prices rise…Hold on for an interesting year or two…

If trump gives out NINJA loans again oh boy we will see prices soar.