The mortgage credit markets have been locked up tight for nearly seven years in reaction to the mortgage crisis. Certainly no one argues with the notion that the crisis was spawned by extremely loose lending. But today regulations ban the fast and loose underwriting that gave birth to the crisis. And beyond that, buyback concerns took it a step further, as lenders layered on even stricter constraints on credit out of fear.
And that's where we stand today--light years removed from a world of no-documentation loans and stated income. But also light years away from welcoming new buyers who are the lifeblood of the housing market.
A clear portrait of just how tight credit standards remain can be found in an article this month by Equifax Chief Economist Amy Crews Cutts titled "The Implications of a Rise in Subprime Lending." And before anyone gets hysterical, the article is not about a return to the bad old days of mortgage lending. It just calmly documents how tight our definition of prime loans has become.
Consider this quote from the article. Cutts writes, "nearly a full seven years past the end of the Great Recession, the median credit score in the first quarter of 2016 for first-mortgage originations was a 749--or 50 points higher than in 2006, in the heyday before the crisis."
Do we really need a...