The Mortgage Market: an analysis
Smith
The mortgage market will carry on a solid growth this year in spite of the rising interest rates. The funding secondary market has witnessed the growing popularity of private label MBS last year.
The GSEs have been waging a war against predatory lending practices and the Alt –A market.
February saw a fall in the fixed rate MBS by 1 %.This is attributed to the lesser number of processing days and a higher refinancing index from the Mortgage Brokers Association. Investors have always found MBS very lucrative, even sometimes accepting low rates. The government backing is all that matters.
The mortgage debt outstanding growth rate for the last five years is 8.25 % riding far ahead of agriculture, oil, constructions and telecom services. Only the software market has a greater growth rate. A decade back the GSEs garnered only 30% of the mortgage loans but today it has 50% of the total US residential mortgages and by 2010 it will is estimated to reach 80%.
The North east states and the west which each covers 24 % of the mortgage origination volume have shown a home price growth in double digits. While Rhode Island and Nevada have been respectively showing price rates increase of 35% .The greatest price rise still is retained by Florida with 47% which lies in the minority zone.
The single family mortgage debt has increased by 196% in a decade and the home equity by 115%. Thus the increased number of mortgage originations. Coupled with economic factors are technological factors which have reduced the loan acquisition costs drastically. Today it is less than 1 %.
The GSEs have set a record in helping the low and middle income families secure a home and also helped in funding new loans. Though the new home purchase market is still lean, yet mortgages are being increasingly used for cash advances with employment levels still not healthy.The treasury bonds are also posing a threat to the MBS market , yet Freddie Mac, Fannie Mae and Ginnie Mae have sustained the pressure . More and more companies are shifting their status to Real Estate Investment Trusts (REIT) to adjust to the changing economic conditions.
With the economy slowly picking up the threads and the interest rising, we are sure to see a new range of mortgage products coming up and the GSEs are gearing to meet them .Mortgages are here to stay and they will power the country forward.
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