To further support that notion, take a look at the latest quarterly Fed assessment of U.S. consumer credit, courtesy of Bespoke Investment Group. I.e., it takes a lot more (a lot more!!) than the ability to fog a mirror (the mid-2000s litmus test) to qualify for a mortgage these days:
click charts to enlarge...
As shown in the chart, mortgage lending standards remain almost brutally high. Even the 10th percentile (i.e., worse than 90% of all loans). Experian describes FICOs of 670 an above as “good”, so that gives you an idea of just how tight mortgage credit has been in recent years; very, very few borrowers with low FICOs (and therefore a lower likelihood of repayment) have been given mortgages since the mid-2000s subprime debacle.
That’s resulted in low overall mortgage origination. As shown in the chart, mortgage origination (both purchase and refinancing) was running in the $700bn range for most of the mid-2000s, topping $1 trillion earlier in the period. The modern mortgage market does around $500bn/quarter of volume, drastically lower given higher home prices and incomes since the mid-2000s.
It’s also important to reemphasize how high quality mortgage lending has been on a FICO basis. As shown in the chart, about half of all mortgage originations go to FICOs north of 780; Experian describes an 800 FICO as “exceptional”, which really serves to emphasize that it’s only very high quality borrowers with easy access to credit at the moment.
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