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State of Lending 2012 - Mortgages Overview

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This presentation covers the key findings of the mortgage section of our report on the State of Lending in America and it's Impact on U.S. Households.

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State of Lending 2012 - Mortgages Overview

  1. 1. The State of Lending in Americaand its Impact on U.S. Households Mortgages Debbie Bocian December 12, 2012 ©Center for Responsible Lending
  2. 2. Homeownership Still Matters
  3. 3. Beyond Financial Benefits
  4. 4. Evolution of the Mortgage Market Loans from Third PartiesIn 2005—theheight of thehousing boom—half of allmortgagesand 71% ofsubprimeloanscame throughbrokers.
  5. 5. Evolution of the Mortgage MarketPrivate-Label Mortgage-Backed Securities
  6. 6. Evolution of the Mortgage Market Fannie-Freddie Market Share DeclinesMortgage-Backed Securities Issued by Wall Street vs. GSEs(“GSEs” = Fannie Mae and Freddie Mac, the government-sponsored enterprises) (“Non-agency MBS” = private label mortgage-backed securities) $2,500.00 $2,000.00 $1,500.00 Non-agency MBS $1,000.00 GSEs MBS $500.00 $0.00 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: FDIC
  7. 7. Factors that Led to the CrisisAbusive Products• “Exploding” adjustable rates• Abusive prepayment penalties• No income verification• False promises - e.g., “you can always refinance”
  8. 8. Evolution of the Mortgage MarketTotal Mortgage Market Volume and Market Share of Subprime and Alt-A Loans 2001-2006 $4,000 45.0% $3,500 40.0% $3,000 35.0% 30.0% $2,500 25.0% $2,000 20.0% $1,500 15.0% $1,000 10.0% $500 5.0% $0 0.0% 2001 2002 2003 2004 2005 2006 Subprime Market Share Alt-A Market Share Total Market Volume (in $billions) Source: Inside Mortgage Finance
  9. 9. Factors that Led to the CrisisWeak RegulationBorrowers, state regulatorsand consumer advocatesrepeatedly raised concernsabout abuses in the subprimemarket –but , for years,nothing was done.
  10. 10. Factors that Led to the CrisisPoor Loan ServicingServicers lacked the propertechnology, staff and systemsto handle the flood offoreclosures produced bymassive loan failures.
  11. 11. Foreclosure Epidemic National Foreclosure Starts1.60%1.40%1.20%1.00%0.80%0.60%0.40%0.20%0.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Mortgage Bankers Association National Delinquency Survey
  12. 12. Disparate Impact of the Foreclosure Epidemic Rates of Completed Foreclosures and Serious Delinquencies by Race/Ethnicity (2004 – 2008 Originations)30.0%25.0%20.0%15.0%10.0% 5.0% 0.0% Asian African-American Latino NH White Others Completed Forclosures Seriously Delinquent
  13. 13. “Spillover” Costs of ForeclosureCRL’s estimate of the spillover costs: nearly $2 trillion.
  14. 14. A Key Issue: Fair, Affordable Access to Home LoansDecline in Private Lender Mortgage Originations by Race/Ethnicity Share of Government-Backed Originations, 2000-2010 (purchase loans, not refinances)
  15. 15. Challenges1. Protect new financial reforms2. Prevent unnecessary foreclosures3. Preserve homeownership opportunities for working families
  16. 16. For More InformationSee all CRL research on Mortgage: http://rspnsb.li/QMGYMaContact us: Kathleen Day (DC): 202-349-1871 Graciela Aponte (CA): 510-379-5518 Ginna Green (SC): 510-866-5989

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