Black Knight has documented an extraordinary story in yesterday's release of the November Mortgage Monitor. (Black Knight does excellent work; don’t be misled by the age of the data -- reliable housing data is notoriously slow to arrive). The following may sound ridiculously obvious, but it’s lost on Congress and most regulators: The number of current foreclosures is the best indicator of the quality of underwriting when the loans were made. We must make some adjustment for economic cycles, foreclosures suppressed in good times and expanded in hard ones, but the lowest total foreclosure starts since good data began in 2005 -- that’s news. And the second obvious part: It’s good news that the bubble aftermath has receded behind us. Here's what's not so obvious: Many of us have claimed since 2009 that mortgage credit has been over-tightened. And gotten yelled at for being industry shills, just wanting another self-serving bubble. This foreclosure data is th...
- The number of current foreclosures is the best indicator of the quality of underwriting when the loans were made.
- November 2015 saw the lowest total foreclosure starts since good data began in 2005 -- that’s news.
- We get a result like this only from over-tightening. If the rulebook gets too tight, it also gets to diminishing returns, denying credit to those worth the risk.
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