A series of reports and recently released financial results indicate that mortgage lending is strengthening.
First quarter results for both J.P. Morgan Chase and Wells Fargo indicate that mortgage originations, applications and gain on sale margins are all up year over year.
Wells Fargo shows an 11 percent increase in originating volume and a 41 percent increase in application volume. Chase's origination volume was up 7 percent in the same time period, a full percentage point higher than industry predictions.
Homes themselves are also more affordable. According to a Chase index based on the average mortgage payment relative to household income, affordability is at 12.3 percent. Although that metric has risen since 2012, it is still well below the 40 year average of 19.7 percent.
The National Association of Home Builders also reported growth in the housing market, rising in April to an index of 56 from 52 the previous month. According to the groups report, any number above 50 indicates growth, as more builders see favorable industry conditions. Experts expect the index could rise to as high as 64 in the next six months.
The recession of 2007-2009 originated in the sub-prime mortgage sector with mortgages to marginal borrowers defaulting at higher than expected rates. Now, FICO reports indicate that borrowers are better off, leading to a healthy loan climate. According to FICO, the average score of approved mortgage borrowers is 749, which is nearing all-time highs. Household net worth is at almost $84,000, a record level, and the household debt service ratio, which measures debt payments as a percentage of disposable income, is at 9.9 percent, a 35 year low.
These figures are good signs for lenders. Graveco's Contract Collector loan servicing software makes it easy to set ideal terms for loans, that will benefit both the financial institution and the borrower.