Twenty Percent Of Mortgage Loans Top 45 Percent Of Monthly Income

Digital Mortgage Platform

New data shows that rising home prices are translating into mortgage loan debt not seen since the housing crisis.

According to The Wall Street Journal, new research from mortgage data tracker CoreLogic found that about one in five conventional mortgage loans completed this winter went to borrowers who were paying more than 45 percent of their monthly incomes toward their mortgage and other debts.

The amount of the loans packaged and sold by Fannie Mae and Freddie Mac also increased 73 percent in the second half of 2017, compared with the first six months of the year. In that same period, overall new mortgages rose 15 percent.

While economists say rising home prices in relation to income and a historic lack of inventory have resulted in the increase in debt levels, loan providers have also been trying to find ways to make homeownership more affordable.

For example, Fannie Mae and Freddie Mac have started backing loans made by lenders who offer to pay down a buyer’s student debt or to help the self-employed obtain mortgages. They also started guaranteeing loans with down payments as low as 3 percent several years ago, and both Fannie and Freddie are backing more loans made to borrowers with debt-to-income ratios of up to 50 percent.

Fannie’s new policy closed 100,000 new mortgages that otherwise wouldn’t have been made in 2017 and early 2018, according to the Urban Institute, a non-partisan research organization.

But economists are quick to remind lenders about the role that easy mortgages played in creating the last housing bubble. The share of new buyers with debt-to-income levels in the 46 to 50 percent range is well below the peak registered in 2007, but it is getting close to the levels of 2004 and 2005, the years leading up to the bubble.

“It’s not a problem today, but it may be a problem tomorrow,” said Stan Middleman, chief executive of Freedom Mortgage, a home lender.