Tags: mortgage | market | bank | housing

NYT: Mortgage Market Remains Weak

Thursday, 16 Jan 2014 01:31 PM

By Dan Weil

While home prices have soared since early 2012, the mortgage market remains weak, with Americans who aren't wealthy still finding it difficult to obtain a mortgage.

The situation means trouble for banks too, The New York Times reports. On Tuesday, Wells Fargo, the nation's largest mortgage lender, announced a 60 percent drop in the amount of mortgages it provided in the fourth quarter — to $50 billion.

JPMorgan Chase, the country's largest bank, announced a 55 percent decrease — to $23 billion.

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Rising interest rates have put a damper on refinancing, making banks more dependent on new home loans. But the picture isn't pretty there either, The Times reports.

"It's a very small market," JPMorgan's chief financial officer, Marianne Lake, said in a conference call Tuesday, according to the paper. "One we haven't seen the likes of since the year 2000."

The 30-year fixed-mortgage rate stood at 4.45 percent Thursday morning, according to Bankrate.

Banks are lending almost only to people with very strong credit scores. The banks are worried about getting sued over any borderline mortgages they offer, and they remember the hits they took on sub-prime loans in the last decade.

Meanwhile, institutional investors, that have boosted the prices of homes by purchasing them as investments, may ultimately help push prices lower if they sell their properties at the same time that homebuilders get more active, says Doug Duncan, chief economist of Fannie Mae.

"The investors have provided a very valuable service in helping transition these properties," he said at a conference last week, according to the Financial Times.

"Will they find that their returns are maximized and it's time to exit at the same time that the builders hit their stride?"

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