|
April 23, 1993
Interest rates held the low edge of their six-week range in a quiet week. The longer rates stay down here, the better the odds of a new low.
The bond market this week seemed oblivious to near term risks: military action against Serbia, referendum in Russia, new employment data due May 7, $35 billion in Treasury borrowing May 10-12, and health care tax trial ballooning.
Economic data were scarce. In a distorted report, New Home Sales slid 4.6% in March. Bad weather hurt results in the South and East, which camouflaged surprise strength in the West. Initial Jobless Claims rose 26,000 to a painfully high 359,000, while March Durable Goods Orders fell 3.7%.
For the first time in a very long time, there are signs that mortgage credit terms are a little easier.
The credit crunch has been the Cheshire Cat of American finance: sometimes a toothy smile, sometimes just stripes, sometimes the whole cat, often nothing but mad laughter above an empty bank branch.
The commercial bank and business lending aspects of the crunch are still hard to define. Some say businesses are too weak to borrow, others claim regulations are too tight, and a few stalwarts deny the existence of any crunch cat at all.
The mortgage crunch has been a straightforward affair.
It started in October, 1979 as an interest rate shock. For the next three years, mortgage rates hovered in the high teens, but the underwriting of incomes and property was still a local, common sense affair.
By 1983, Federal Agency underwriting became gradually more restrictive, while securitization of Agency mortgages became the primary source of money.
Oddly, the slow-motion collapse of the Savings & Loan industry preserved reasonable credit terms for a while. Many a thrift continued to lend under the pretense of Fannie Mae underwriting, but it was really their old, feel-it-to-see-if-it's-warm standard.
Fannie and Freddie tried to simplify things in the late Eighties with a "limited document" approach, but dispensing with key documents turned out to be a disaster. Credit standards hit the chokehold stage with the demise of limited document programs in 1991.
The sense of easier loan terms this spring is nothing dramatic, just an "I don't need that" here, and a surprise clean approval there. The disasters in the Oil Patch and New England in the Eighties may finally be fading from collective mortgage memory.
|
