Lending Standards, Vehicle Miles

The FHFA said its goal is to nudge the housing market into higher gear by making mortgages a little easier to obtain. Travel on all roads and streets nationwide was up by 0.4 percent for August 2014.

Though recovered from its worst days during the recession, it’s generally acknowledged that the U.S. housing market hasn’t recovered as much as it could have, especially compared with other post-recession periods. In a speech at the Mortgage Bankers Association annual convention on Monday, FHFA director Melvin Watt, whose agency oversees Fannie Mae and Freddie Mac, talked about plans to loosen credit for borrowers. Though Watt didn’t offer a timetable for the policy changes – or a lot of detail – presumably the FHFA’s goal is to nudge the housing market into higher gear by making mortgages a little easier to obtain.

Watt said that the GSEs are working to develop “sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the [GSEs] will be able to responsibly serve a targeted segment of creditworthy borrowers with lower down payment mortgages by taking into account ‘compensating factors.’” The new guidelines, in other words, would allow Fannie and Freddie to buy mortgages with down payments as low as 3 percent, instead the current 5 percent (before the recession, it was 3 percent).

Watt also said that the agency is soon going the clarify the circumstances under which the GSEs require mortgage issuers to buy back bum loans. The uncertainty surrounding that has been a factor in holding back mortgage lending, or at least making loans more expensive. “We know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations,” Watt said, promising that new guidelines would be forthcoming.

Vehicle Miles Edged up in August 

The U.S. Department of Transportation reported on Monday that travel on all roads and streets nationwide was up by 0.4 percent (1 billion vehicle miles) for August 2014, compared with August 2013, with travel for the month estimated to be 267.8 billion vehicle miles. Cumulative travel for 2014 was up by 0.6 percent (11.1 billion vehicle miles).

Vehicle miles traveled is an indirect indicator of economic activity, and as such shows the economy stuck in second gear since the end of the recession. Total vehicle miles, as measured by moving 12-month totals, peaked just before the recession at just above 3 trillion, and hasn’t reached that total since then, hovering just below it. Historically, previous recessions haven’t had that kind of impact on vehicle miles driven, which have tended to go up every year for the last four decades, with only brief pauses during recessions.

Even lower gas prices might not change the new, more stagnant pattern, since the economy isn’t the only factor in vehicle miles driven. For one thing, older people tend to drive less, and the U.S. population is aging. But younger drivers also seem to be driving less than they used to. From 2001 and 2009, for example, the average annual number of vehicle-miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita – a drop of 23 percent, according to the U.S. PIRG Education Fund and Frontier Group – and that held true even for younger people who were doing relatively well in the job market.

Wall Street had a modest up day on Monday, with the Dow Jones Industrial Average gaining 19.26 points, or 0.12 percent. The S&P 500 advanced a more robust 0.91 percent, and the Nasdaq was up 1.35 percent.