A report from Market Watch. "While the days of 'NINJA loans' (no income, no job, no assets) are for the most part gone from the American mortgage marketplace, at least one housing think tank says the pendulum has now swung too far in the other direction and made it harder for many Americans to get a mortgage. According to the Washington, D.C.-based Urban Institute, the pool of mortgage loans made between 2011 and 2015 have even lower default rates than the more 'normal' lending period of 1999 to 2003, when less than 2% of the loans defaulted after 10 years."

"Only 'the best borrowers are getting loans today and these loans are so thoroughly scrubbed and cleaned before they’re made that hardly any of them end up going into default,' wrote Laurie Goodman, co-director of the Urban Institute’s Housing Finance Policy Center. 'A near-zero-default environment is clear evidence that we need to open up the credit box and lend to borrowers with less-than-perfect credit,' she wrote."

"The Mortgage Bankers Association’s credit availability index, which tracks the relative ease (or difficulty) of obtaining a mortgage by factoring in data such as credit scores, guidelines from institutional loan buyers and appetite for risk, shows that while credit availability has dramatically increased since 2011, it has plateaued since the middle of last year, and is well below the levels of 2004, the last 'normal' year of lending and credit scores."

The New York Times. "Mortgages to borrowers with spotty credit histories have yet to come roaring back from the financial crisis, but they are on the rise at the private equity giant Lone Star Funds. Its wholly owned mortgage business, Caliber Home Loans, is one of the few financial firms to report a significant percentage increase this year in the dollar value of subprime mortgages it is managing and servicing for homeowners."

"Most of the subprime mortgages at Caliber are 'legacy' loans, those issued before the housing bust, which Lone Star acquired from banks and federal agencies. But Caliber is also one of the few lenders beginning to issue mortgages to borrowers with less than perfect credit records and to issue bonds backed by those loans."

"Caliber, a firm that Lone Star began cobbling together nearly four years ago, is now one of the fastest-growing mortgage finance firms in the country. Its portfolio of subprime mortgages increased about 14 percent, to $17 billion, in the last year, according to Fitch Ratings. Mortgages to borrowers with shaky credit histories account for 18 percent of the $93 billion in mortgages that Caliber manages and collects payments on from homeowners."

"In June, Fitch reviewed and rated the first securitization of nonprime mortgages Lone Star brought to market, a $161 million bond offering backed by nearly 400 mortgages, which is one of the largest securitization of nonprime mortgages since the financial crisis. In its review, Fitch noted that the 'credit quality of the borrowers is weaker than prime.'"

"Now, Lone Star plans an even larger bond offering backed mainly by nonprime mortgages written by Caliber. In a Sept. 6 pre-sale ratings report, Fitch said the newest $217 million securitization will be backed by 501 mortgages."

The Australian. "The biggest market in the US, real estate, makes a mockery of the country’s reputation as a bastion of free enterprise. The level of government interference in the $US26 trillion ($34 trillion) US housing market, worth 40 per cent more than it was five years ago, continues to rise automatically and with little scrutiny."

"The toxic subprime loans that spread around the world stoking the 2008 financial crisis have evaporated. But in their place a new socialisation of mortgage risk has emerged, underpinning surging house prices and increased borrowing. Prices in Denver, Seattle and Portland are rising at Sydney-style double-digit annual pace, while US house prices overall have been rising about 5 per cent a year since 2012. Texas house prices are already 20 per cent above their 2006 peak."

"'Our nationalised home lending system is an economics-free zone,' says Edward Pinto, a scholar at the American Enterprise Institute with 42 years in the industry. 'It’s a frog in a pan on slow boil: we have the unseemly situation of low-capital government entities competing with each other to underwrite risky loans. This will continue until it can’t, which could be 12 or 15 years away.'"

"Chastened by billions in fines and tougher regulations, the US banks have almost vacated the field and now originate fewer than one-fifth of new home loans. Quicken Loans, a Detroit finance company, for instance, is about to overtake banking giant Wells Fargo as the biggest US home lender. Already more than 60 per cent of the $US10 trillion in US mortgages outstanding are directly or indirectly insured by the US government, or a smattering of New Deal and 1960s-era agencies with varying degrees of government ownership and control."

"These loans are packaged up and sold to investors, such as large pension and mutual funds, all around the world. And this share is growing, with about 90 per cent of new loans guaranteed by these agencies — up from about 80 per cent a decade ago. 'The vast majority of mortgage risk is now directly borne by US taxpayers with basically no capital standing behind it,' says Mark Calabria, a financial regulation expert at the Cato Institute."

"Even the US Federal Reserve is helping prop up demand. It holds $US1.7 trillion in mortgage-backed securities. While the quantitative easing programs that instigated the build-up have finished for now, the Fed still buys about one-quarter of new mort­gages issued to maintain its existing stock."

"Investors wouldn’t be so keen if credit quality mattered to them. But it doesn’t. These loans are insured or guaranteed by one of Fannie Mae, Freddie Mac or Ginnie Mae. As long as they conform to increasingly generous limits laid down by regulation, these agencies will guarantee — for a fee of less than 0.7 percentage points, which ultimately is passed on to the borrower — interest payments and principal."

"'Most of the benefit doesn’t go to bring in more borrowers, a large portion of it goes to higher prices for the sellers,' says Pinto. The system doesn’t appear to have helped home ownership much, though. The US home ownership rate has steadily fallen from 69 per cent in 2004 to 63 per cent, the lowest level since the 60s."

"Nevertheless, borrowers believe they are getting an excellent deal. US households can borrow for 30 years fixed at 3.5 per cent, which is less than many sovereign governments have to pay. More than 80 per cent of mortgages outstanding are of this type, a feature extending back to the 30s when congress first stipulated the duration of loans that Fannie Mae would insure."

"Intended to be temporary, the agencies’ loan limits were relaxed significantly in the wake of the financial crisis, but they remain high and are about $US625,000 in many parts of the US. 'A more cynical interpretation is that people like (congress members) Barney Frank and Nancy Pelosi wanted to see more of the housing markets in their own districts (California and Boston) covered,' says Calabria."

"Not surprisingly, the average loan to valuation ratio has crept up from 80 per cent to 86 per cent since the financial crisis. While US banks have roughly doubled their capital levels (albeit from not very much) to more than $US1.1 trillion since the financial crisis, Fannie and Freddie and the Federal Housing Authority — which insures the loans that Ginnie Mae packages up and sells — have little meaningful capital. If swathes of loans default, taxpayers will be picking up the tab."