Monday Morning Cup of Coffee: FICO execs say borrower credit keeps improving

Spring selling still going slow

Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.

This week is likely to be another one that’s dominated by the release of significant reports that indicate the health (or lack thereof) of the housing market.  Business Insider has a good rundown of everything to expect this week.

Of special note this week, Thursday will have the weekly Unemployment Insurance Claims Report from the U.S. Department of Labor. This report is always a good indicator of the health of the economy. HousingWire always has this news covered for you.

Also on Thursday is the Housing Market Index for May from the National Association of Home Builders. According to Business Insider, economists are expecting a jump from April’s figure, but the jump won’t be significant due to buyer traffic remaining “sluggish.”

And on Friday, is the monthly report on housing starts. Considering how difficult it is for many buyers to get credit to buy a home, the housing starts will likely remain lower than they normally would considering that it’s the start of Spring buying season.

Speaking of tight credit standards, the Los Angeles Times spoke with executives at FICO and VantageScore Solutions. Both companies provide the credit score that is used to determine whether a borrower is worthy of a loan or not.

Both companies say that borrower behavior has improved over the last few years with less borrowers falling into serious default. According to the Times report:

To illustrate how consumer behavior has improved, Joanne Gaskins, senior director of scores and analytics for FICO, cited one internal study that examined mortgage default data through 2011. At a FICO score level of 700 in 2005, roughly 36 borrowers paid their loans on time for every one who went into serious default. In 2011, by contrast, for every one defaulting mortgage borrower, roughly 91 paid on time. That's a huge decrease in risk to the lender.

So maybe it’s time for lenders to loosen the reigns and help jumpstart the housing market. No one is arguing for a return to pre-crisis lending practices, but perhaps lenders have over-corrected a little too much.

Part of the reason for the slow start may be due to sellers becoming more aggressive in the pricing of their homes. RealtorMag reports that 40% of sellers say their plan to price their homes above market value. That figures comes courtesy of a Redfin survey of 1,128 active home sellers in 25 cities.

It’s been said that we’re in a seller’s market right now, but it appears that some sellers may be taking that belief a little too far. Overpricing a home could drive many potential buyers, especially those with limited credit access. Not all of us can get jumbo loans.

And it’s looking like we can’t depend on Congress to fix the mortgage system, at least not this year. As Bloomberg reported last week, six key Democrats have decided to pull their support for the Johnson-Crapo GSE reform legislation.

Without the support of New York’s Charles Schumer, Ohio’s Sherrod Brown, Oregon’s Jeff Merkley, New Jersey’s Robert Menendez, Massachusetts’ Elizabeth Warren, and Rhode Island’s Jack Reed it’s likely that the Johnson-Crapo bill won’t make it past the Senate Banking, Housing and Urban Affairs committee, let alone the entire Congress.

The Washington Post has confirmed that report, after speaking with aides on Capitol Hill aides that are not authorized to speak publicly about the decision. Keep it tuned to HousingWire for the latest developments on GSE reform, but don’t hold your breath that anything will happen before the mid-term elections (or 2017), depending on who you believe.

From the good news department, Warren Buffett, the “Oracle of Omaha,” told the collected masses at the Berkshire Hathaway shareholders meeting last week that he has confidence in Janet Yellen to lead the Federal Reserve Bank. He compared Yellen to Ben Bernanke, who he called a “hero at the time of the crash and panic” and someone who’s “a very smart man and handles things very well.”

With the taper looking likely to continue, here’s hoping the Buffett, who’s been right plenty of times in his illustrious career, is right about Yellen too.

And finally, the Federal Deposit Insurance Corp. reported no bank closings last week. That marks two weeks in a row without a FDIC bank closing.

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please