St Casimirs Mortgage Minute

Millions of U.S. Consumers Escaping Subprime Credit

Fair Isaac Corp., or FICO, reports that the share of U.S. adults with subprime credit scores dropped 20.7 percent in April, marking the lowest level since at least 2005. This is the sixth consecutive year-over-year decrease and much less than the 25.5 percent peak in 2010 during the financial crisis. The trend is expected to bring relief to the big banks that tightened credit standards in the wake of the crisis, as a rise in more creditworthy borrowers would enable them to bolster lending without lowering standards and boost revenue at a time when their profits are being squeezed by super-low interest rates. "It will have a positive impact on loan volume, loan growth, and revenue," said Morgan Whitacre, consumer client underwriting executive at Bank of America. Observers believe credit card and auto lending would be the first types of loans to benefit. Meanwhile, defaults are near record lows. According to FICO, only 11.8 percent of borrowers were 90 days or more past due on at least one debt obligation during the 12 months through April, down from 13.3 percent during the 12 months through October 2013.

From "Millions of U.S. Consumers Escaping Subprime Credit"
Wall Street Journal (06/22/16) Andriotis, AnnaMaria

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Mortgage Applications Up 3 Percent on Lowest Rates in Three Years

The Mortgage Bankers Association reported on June 22 that total mortgage application volume rose 2.9 percent on a seasonally adjusted basis from the previous week, and applications are now up almost 35 percent from this time last year. Refinance applications climbed 7 percent from the previous week, while purchase applications slipped 2 percent for the week but jumped 12 percent on a year-over-year basis. Refinance applications accounted for 57.7 percent of total applications, up from 55.3 percent the previous week. Meanwhile, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell from 3.79 percent to 3.76 percent, marking the lowest level since May 2013.

From "Mortgage Applications Up 3 Percent on Lowest Rates in Three Years"
CNBC (06/22/16) Olick, Diana