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Student Loans: The Origins of a Racket

Published by Anonymous (not verified) on Fri, 19/02/2021 - 12:00am in

"Education can lift people and propel the country’s economy, but it can’t do that if it leaves many of its beneficiaries weighed down by life-altering amounts of debt." - Devon Lindey ...

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Mortgage Rates Decline and (Prime) Households Take Advantage

Published by Anonymous (not verified) on Thu, 18/02/2021 - 3:00am in

Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

LSE_2021_HDC_mortgage_scally_460_art

Today, the New York Fed’s
Center for Microeconomic Data
reported that household debt balances increased by $206 billion in the fourth quarter of 2020, marking a $414 billion increase since the end of 2019. But the COVID pandemic and ensuing recession have marked an end to the dynamics in household borrowing that have characterized the expansion since the Great Recession, which included robust growth in auto and student loans, while mortgage and credit card balances grew more slowly. As the pandemic took hold, these dynamics were altered. One shift in 2020 was a larger bump up in mortgage balances. Mortgage balances grew by $182 billion, the biggest quarterly uptick since 2007, boosted by historically high volumes of originations. Here, we take a close look at the composition of mortgage originations, which neared $1.2 trillion in the fourth quarter of 2020, the highest single-quarter volume seen since our series begins in 2000. The Quarterly Report on Household Debt and Credit and this analysis are based on the New York Fed’s Consumer Credit Panel, which is itself based on anonymized Equifax credit data.

In the first chart, we look at a figure direct from the Quarterly Report: total mortgage originations by credit score band. Here, the boom in originations is starkly visible—originations to the highest credit score borrowers rose sharply during 2020. (We use the Equifax Risk Score 3.0). The origination volume in the fourth quarter of 2020 just surpassed the previous high, from 2003, when a dip in mortgage interest rates prompted a boom in mortgage refinancing. Although these two bumps in mortgage originations are similar in magnitude, the composition is quite different; 71 percent of originations in the fourth quarter of 2020 went to borrowers with credit scores over 760, while in the third quarter of 2003, only 31 percent of those new mortgages went to the most creditworthy borrowers. Researchers have concluded that the 2003 refi boom had long-running consequences, contributing to over-leveraged balance sheets as home prices fell.

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Purchases or Refis?

Refinances do tend to go to higher-credit-score borrowers, compared to purchase mortgages—this is because those who are refinancing already have a mortgage that they’ve been repaying for some time and are building their credit history. Thus, this high volume of superprime mortgage originations suggests we are in the midst of another refinance boom. And homeowners are taking advantage of the mortgage interest rates at historic lows, even taking some cash out with their refinanced mortgages. In the following chart, we break out mortgage originations into purchase and refinances. The origination boom in 2020 is owing to a confluence of high refinance originations as well as high purchase originations—in fact, in nominal terms, the level of purchase originations nears that seen in 2006. As for the increasing level of purchase originations, it’s consistent with high levels of home sales paired with increasing prices. Overall, refinance originations in 2020 were at their highest level since 2003. Although about 15 percent below the 2003 level in terms of nominal aggregate debt, some 7.2 million mortgages were refinanced in 2020, which was less than half the 2003 count (15 million!).

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Who’s Buying? Looking Into Purchase Originations

Although it is difficult to compare the volume of purchase originations with the levels seen in 2005-06 due to differences in home prices, the trend was unmistakably increasing this year, and to a high level. In the following chart, we break purchases out into three groups: (1) first-time homebuyers, or those whose origination marks the first mortgage on their credit report, shown in blue; (2) repeat buyers – individuals who are making a purchase that is not their first, shown in red; and (3) second home buyers and investors—those who have a new origination with one or more first mortgages already on their credit report. The boom years preceding the Great Recession—which similarly saw a brisk pace of mortgage originations, had the three lines at roughly equal volumes for several quarters. And then as house prices began to decline and the market began to crash, it was first-time buyers who were able to come in at a higher rate—incentivized by first-time homebuyer credits in the Housing and Economic Recovery Act, as well as declining interest rates and home prices. But during the slow recovery in originations in the past eight years, the first time and repeat buyer lines have essentially tracked each other, while second home and investor purchases have trailed, only picking up slightly in the past year.

LSE_2021_HDC-mortgage_scally_ch3-01

2020 Vintage Remains Very High Quality

As we describe above, the bulk of newly originated mortgages are going to borrowers with the highest credit score. But is this because of the volume of refinance originations? In the final chart, below, we look at the median credit score of newly originated mortgages, by type. Refinanced mortgages typically go to higher score borrowers than purchase mortgages, due to their established repayment histories. However, when we break out purchasers into first-time and repeat buyers, we see that the median credit scores are quite close for refinancers and repeat buyers, while the first-time buyers have lower credit scores, and always have. The median credit score of refinancers and repeat buyers was just below 800 at the end of 2020, about 60 points higher than that of first-time buyers. With a look to the series history, new mortgages are more prime—for even first-time buyers, median credit scores have slowly drifted up since 2002-06, when they hovered in the high 600s.

LSE_2021_HDC-mortgage_scally_ch4-02

Cha-Ching! Cashing Out Home Equity When the Rates Make Sense

With refinances picking up in 2020, we look to see whether consumers are cashing out, and drawing against their home equity. In the chart below, we show the quarterly cashout refinance volume, which is calculated as the difference between the borrowers’ new mortgages and the mortgages that the refinances replaced. Keeping in mind that the data we present here are not adjusted for inflation, cashout refinance volume is still notably smaller than what was seen between 2003-06. However, we do see a notable increase in cashout refinance volumes, which spiked in the fourth quarter of 2020 and show no sign of abating. Homeowners withdrew $188 billion in home equity over the course of 2020. One important note though—although this is a big increase, it’s also associated with lower average cashout amounts. Borrowers who refinanced in 2019 withdrew, on average, an additional $49,000; while borrowers who refinanced in 2020 withdrew, on average, $27,000. The median cashout withdrawal in 2020 was only $6,700, suggesting that at least half of the refinancers borrowed only enough additional funds to cover the closing costs on the new mortgage. Still, a substantial minority of refinancers took out some cash from their property, which they can use to fund consumption or other investment opportunities, including home improvements. Meanwhile, borrowers who did not choose to take out extra cash saw an average savings of $200 on their monthly mortgage payment, improving their monthly household cash flow.

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What To Look For Going Forward

Support for households who have suffered job and income losses has been a key feature of the CARES Act, through both the direct financial transfers to households as well as the moratoria on Federally backed mortgages and student loans. Meanwhile, many households are taking advantage of the historically low mortgage interest rates that are a consequence of the supportive monetary policy. It will be interesting to see whether households will maintain these high rates of home purchases and refinances into 2021 and more generally how households will adjust their balance sheets depending, in part, on whether and how long forbearances continue on payments on federally backed mortgages and student loans.

Chart data

Haughwout_andrewAndrew F. Haughwout is a senior vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

Lee_donghoonDonghoon Lee is an officer in the Federal Reserve Bank of New York’s Research and Statistics Group.

Scally_joelleJoelle Scally is a senior data strategist in the Bank's Research and Statistics Group.

Vanderklaauw_wilbertWilbert van der Klaauw is a senior vice president in the Bank’s Research and Statistics Group.

How to cite this post:

Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw, “Mortgage Rates Decline and (Prime) Households Take Advantage,” Federal Reserve Bank of New York Liberty Street Economics, February 17, 2021, https://libertystreeteconomics.newyorkfed.org/2021/02/mortgage-rates-dec....


Related Reading

Household Debt Balances Increase as Deleveraging Period Concludes


Interactive: Household Debt and Credit Report


CMD: Housing Market





Disclaimer

The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

Despite What You Heard, There Was No Peaceful Transition

Published by Anonymous (not verified) on Sat, 23/01/2021 - 2:39am in

Anyone trying to find the edges of the U.S. Overton Window right now must feel like they’re tracing an amateur rendition of an early Picasso. After a summer spent chanting “defund the police,” self-identifying progressives applaud the pouring of some 25,000 troops and busloads of out-of-city law enforcement into the streets of Washington, DC. Those eager to cheer the departure of a racist, sexist, war-hawking elitist from the White House were quick to welcome a new racist, sexist, war-hawking elitist. Those who lambasted Trump for dragging more swamp creatures into the swamp rather than draining it are applauding Biden for his diverse cabinet appointments, ignoring the revolving door of corruption and oppression they represent. Those who (correctly) decried the Paris Climate Agreement for being flimsy and non-committal are celebrating Biden’s executive order to rejoin it.

Indeed, anyone applauding Biden’s first flicks of the wrist as President would do well to look beyond the window dressing. Of the 15 new executive orders that aren’t merely a light Trump-eraser, they herald the return of the classic Democratic practice of sprinkling progressive-tasting garnish around deep systemic problems. For example, Biden’s executive order to once again kill the Keystone XL pipeline project, a project that Obama had already killed (that Trump then revived) is at best a step sideways, not forwards. Biden has said outright that he has no interest in a Green New Deal, despite the fact that the watered-down version that bounced around Congress left gaping holes in truly addressing climate chaos. He has also ignored repeated calls to kill both Line 3 and the ill-fated Dakota Access Pipeline.

Meanwhile, the executive order to “advance racial equity” in the federal government grinds sharply against Biden and Harris’ own political histories while, much like Pelosi’s toothless Climate Crisis committee, it offers up no real action to address the issue at hand.

The same is true of Biden’s call to defend DACA, the Obama-era legislation that granted a renewable two-year stay-of-deportation for children who immigrated to the U.S. with their parents. As DACA recipient Ella Mendoza explained to me back in 2017, “DACA was flawed from the very beginning.” Mendoza described a carrot and stick program that demanded recipients sign admissions of illegal border crossings for momentary reprieves that could be overturned at any time. The convenient announcement of DACA around Obama’s re-election just highlighted for Mendoza that this was really about dismissing “Obama’s deportation of more than 2 million people” just in time for election day. “You can tell me it’s about children all you want, but you’re deporting our parents,” she said. In short, DACA wasn’t a dream come true. While people like Mendoza struggled to build a life under the gaze of the deporter-in-chief, Obama was only too glad to throw other children in cages, a practice many only found abhorrent when Trump did it years later. DACA isn’t comprehensive immigration reform – it never was. Establishment Democrats and their fans cooing over it like the return of a lost child doesn’t change that fact.

Looking ahead, many might feel a sense of relief that Biden at least takes the COVID-19 pandemic seriously, signing executive orders to mandate masks in federal buildings, to rejoin the World Health Organization and to address the financial free-fall impacting millions of Americans. However, if you look closely, you’ll see again that unfulfilling Democratic garnish sprinkled on deep systemic rot. The executive order to extend the CDC’s eviction and foreclosure moratorium until March 31 doesn’t address the loopholes in the original order that still allow for evictions. Furthermore, the moratorium does not cancel rent. Tenants will still be liable to pay for all missed payments once the moratorium ends, and landlords are still allowed to hike the rent during the unpaid months.

Likewise, the “pause” on student loan payments demonstrates yet again how little the Democrats are willing to help the people. The move carries over a pause which the Trump administration started while “asserting” that Biden will carry through on his campaign pledge to cancel $10,000 of student loans per borrower, noting however that it will take time as the cancellation has to go through Congress first. Great! So we’ve got a Trump leftover plus an empty promise to shave off $10k in student loans when the average debt sits at $32,731, and that’s not including accrued interest. Biden’s executive order is essentially a Post-It note ‘IOU’ with a smiley face scribbled on the back. It kicks the can over to Congress in the hopes we won’t realize that Biden could actually cancel all $1.7 trillion in student debt with a different (read: actually useful) executive order. He’s probably also hoping we’ll forget that back in 2005, Biden was one of 18 Democrats who voted excitedly for a bill that stripped student loan borrowers of bankruptcy protections, leading to a tripling in student loan debt over the next ten years. Oddly enough, Biden never voted to say, strip multi-million dollar corporations of their bankruptcy protections. If you’re a huge corporation, you can easily wriggle out of your debts to workers, communities and local governments. If you’re a destitute student, there’s no way out of your debt. Still, Biden could do it – he could lift the burden of an indebted future from millions, a move that even the likes of Business Insider agree would bolster the economy and in particular benefit communities of color and low-income households. Gee, sounds like that’d be a win-win in your quest to “advance racial equity” there Joe.

Of course, the fact of the matter is that Biden, the master-mind of the ’94 crime bill, has no interest in advancing racial equity. He’s never cared about the plight of people drowning in debt – or drowning in rising floodwaters – and he doesn’t care now. He has no intention of progressing or changing the direction of his political career. Indeed, he quite glibly announced to rich donors back in 2019 that “nothing will fundamentally change” when he takes the Oval Office. Based on his cabinet picks and his first orders as President, I think we should take him at his word.

The relief that Trump is gone is understandable. But don’t be lulled by the very conditions that gave rise to Trump’s presidency in the first place. To celebrate our so-called return to a democracy we’ve never had with a decency that is at best shallow, and at worst a conniving cover-up for crimes against humanity speaks of a belief in American exceptionalism that is neither warranted nor helpful. Underneath the progressive platitudes and unfulfilling garnish lie the same systemic rot, a rot that was perhaps most noticeable on Inauguration Day itself – when two worlds stood sharply demarcated by militarized checkpoints, and the revolving door of red and blue capitalist imperialism was almost literally visible.

Walking around DC on Inauguration Day, I felt like I was touring a vast military exhibition – which basically, I was. Military vehicles rolled down quiet neighborhood streets as if they’d gotten lost on their way to the frontlines. National Guardsmen with giant rifles and camo gear stood out like militantly sore thumbs against the backdrop of a local park. Operation Peaceful Transition (as I’ve come to call it) was in full swing, with all the irony of previous imperialist missions like Operation Iraqi Freedom. In the shadows of Biden and Harris’ gleeful photo-ops with the likes of George W. Bush, community members across DC were working tirelessly to address the effects of a city shut down, blocked off, and singularly concerned with providing the ruling class with a cushy Inauguration Day.

DC Inauguration

Credit | Eleanor Goldfield | Art Killing Apathy

DC Inauguration

Credit | Eleanor Goldfield | Art Killing Apathy

DC Inauguration

Credit | Eleanor Goldfield | Art Killing Apathy

Indeed, despite DC serving as the stage for this tragicomedy of political theater, a lot of locals weren’t focused on Joe Biden. Community members were busy raising funds and pooling resources for neighbors who were scared to leave their homes or go to work, fearing both fascist violence and the scourge of freshly deployed ICE and CBP officials (two sides of the same coin). Others were delivering groceries or hot meals to people who were understandably creeped out by the massive military and police presence in the city. Mutual aid groups set up 24-hour rolling shifts to address emergency requests and to share information about everything from checkpoints (potentially life-changing information depending on your immigration status) to local POC-owned restaurants to order food from.

Meanwhile, Biden stood at perhaps the most protected podium in the world, speaking of hope, unity, leadership, peace, and a brighter future. These are two worlds disconnected. We the people are literally barred from his world, and he has no interest in entering ours.

There is no such thing as a peaceful transition in a city with more troops than both Iraq and Afghanistan. There is no peaceful transition for the black and brown folks displaced in the fastest gentrifying city in the nation. There is no peaceful transition for a city with a higher maternal mortality rate than Syria.

There is no peaceful transition for a country with the largest military and surveillance system the world has ever seen. There is no peaceful transition for a country that represents 5% of the world’s population but 25% of the world’s incarcerated. There is no peaceful transition for a nation where slavery is still legalized, where millions have died due to lack of healthcare, housing and other basic human rights.

The revolving door of imperialist capitalist preservation turns again. But there is nothing peaceful about it. And the hope that flows from the twisted tongues of our politicians is not hope for the people. Still, that doesn’t mean that there is no hope. Indeed, quite the opposite. Our hope lies in recognizing and manifesting our power – in realizing that projects like KXL would never even have been canceled in the first place were it not for people’s collective, tireless and targeted actions.

Our hope lies in the roots – in these communities that bustle and build in the shadows of empire. It lies in the crowns of trees where tree-sitters block the way of pipelines. It lies in solidarity – in growing everything from garlic in community gardens to growing networks of interconnected local aid groups. It lies in direct action. As Direct Action & Climate Justice Organizer Alex Cohen notes, “Direct Action builds the new and stops the old. Direct Action brings hope in the darkest times. Direct Action builds community, creates assembly, fuels worth and empowerment, and builds people power. No matter how grave the time, it remains a tool available to us 24/7 and 365 days a year, on our own terms.”

It is this hope and these tactics that we must take into the Biden presidency – into every presidency.  Instead of gazing at the spires of empire through the Overton Window, fogged by false promises and twisted by hypocrisy, look closer to home. Don’t look up for liberation, look next door, down the street. These aren’t progressive platitudes but quite literally how we survive – how we fight, how we build – on our own terms in these grave times.

Feature photo | Eleanor Goldfield  | Art Killing Apathy

Eleanor Goldfield is a creative radical, journalist, and filmmaker. Her work focuses on radical and censored issues via photo, video, and written journalism, as well as artistic mediums including music, poetry, and visual art. She is the host of the podcast, Act Out, co-host of the podcast Common Censored along with Lee Camp, and co-host of the podcast Silver Threads along with Carla Bergman. Her award-winning documentary film, “Hard Road Of Hope” is about West Virginia as both resource colony and radical inspiration. She also assists in frontline action organizing and training. See more of Elanor’s work @ ArtKillingApathy.com | HardRoadofHope.com

The post Despite What You Heard, There Was No Peaceful Transition appeared first on MintPress News.

Student Debt Pushes to the Front of Biden’s Agenda

Published by Anonymous (not verified) on Tue, 29/12/2020 - 11:51pm in

When the coronavirus pandemic hit the US this spring, lawmakers on both sides of the aisle struggled to pass a relief package. Along with expanded unemployment benefits and stimulus checks, Congress provided much-needed student loan relief. While these measures largely had bi-partisan support, the matter has come to the front of the new agenda. Continue reading

The post Student Debt Pushes to the Front of Biden’s Agenda appeared first on BillMoyers.com.

On the Demise of Universities

Published by Anonymous (not verified) on Fri, 11/12/2020 - 8:33pm in

More on how neoliberalism has been digging a grave for universities.

Michael Olenick: How Biden Could Tackle the Student Loan Crisis

Published by Anonymous (not verified) on Mon, 23/11/2020 - 10:19pm in

Biden could resort to a simple bankruptcy fix for the student loan mess. But would he?

I Suffered, Therefore So Must Others

Published by Anonymous (not verified) on Tue, 17/11/2020 - 7:56am in

I want to expand on this idea, ably put my Amal El-Mohtar here:

This idea seems right: the first is better than the second.

But the actual correct stance is:

This bad thing never happened to me BUT I can imagine how horrible it would be, so I want to make sure it doesn’t happen to other people.

None of us, no matter how bad our lives are, have experienced all the horrible things that can happen. Conservatives are notorious for being terrible except about one thing, you dig and it’s “My child got esophagal cancer so now I champion that,” OR “Someone I care about was shot with an assault rifle so now I’m against that.”

Imaginative empathy allows us to imagine being a blood diamond slave in the Congo, or there during a school shooting, or suffering from grinding poverty even if we’ve had good lives. It allows us to be disgusted and horrified by people cleaning out sewers by hand (Indians euphemistically call this “manual scavenging”) or what it’s like to suffer from anti-black racism or caste oppression. We don’t need to have suffered something either to say, “Others should suck it up,” or “Others shouldn’t have to go through what I did.”

This isn’t a call to removing all risk and stress from life. Not all unpleasant events are bad. The general rule, now well-supported by various studies, is that short term stress is good, and chronic stress is bad.

When I went to school, we had exam hell week: one before Christmas, one at the end of the year. The final exam week usually determined 50 percent of our marks.

(I am fundraising to determine how much I’ll write this year. If you value my writing and want more of it, please consider donating.)

This arrangement made for “good stress:” it was short-term and made you learn how to take high-impact tests. I’ve never feared a test since then: I assume I can pass any academic test, if given enough time to study, and my idea of enough time is a lot less than most people’s.

We don’t want to protect people from good stress — from short term challenges that teach them what they can do.

Chronic stress or traumatic stress, however, we do want to avoid. No one is improved by rape (prison administrators take note). No one is improved by being poor for years or even months on end. No one is improved by chronic hunger or fear.

The larger questions are why some people are unable to employ imaginative empathy: Why they must experience hell first-hand to realize “Oh! Hell is bad!” and why some can’t extrapolate this to “All hells are bad.”

Life is better with happy, healthy people. Heaven and Hell are both other people: if you’re surrounded by happy, loving people, odds are you’ll be happy. If you don’t start that way, you’ll almost certainly wind up that way. We shouldn’t want our fellow citizens to be subject to damaging long-term stress of traumatic events simply because we have to live with them.

The exception, alas, is that some people can’t learn that something is bad if it doesn’t happen to them. Their depraved indifference is a danger to everyone around them and a challenge to ethics. The people who need to be poor or spend time disabled or seriously sick are the people who think it’s no big deal. Some people, it seems, can only learn that “Hell is bad” if they or perhaps someone they love, spends time in Hell.

El-Mohtar’s tweet, of course, was about the possibility of Biden using an executive order to forgive $50k of student debt.

The good way to do it would be to get rid of the bankruptcy bill Biden pushed that made it impossible for student loans to be discharged in bankruptcy, which would sort the situation out fast (it is NEVER a good idea to make it so that creditors do not have to worry about non payment. NEVER.)

But Biden probably won’t have control of Congress, and this is better than doing nothing, even if some people who have paid off student loans feel it is “unfair.” It was unfair they had usurious loans, but just because they suffered doesn’t mean others should.

The best solution, of course, would be to go back to 60s-style universities where tuition is either cheap or non-existent. The cost is a lot less than any of the repeated bailouts of rich people and could be made even lower by doing something about university admin bloat (that’s an entire other article I may write one day) and a more complete solution would be to do something about credential inflation: Most jobs don’t need a degree and the idea that they do today is absurd.

But what Biden can do is forgive $50K with an admin order and he should. It’s a good thing he can do, and if it doesn’t relieve the suffering of people in the past, well, hopefully you are, at least, the sort of person who doesn’t want others to suffer like you did.

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Unsanitized: Student Debt Cancellation Now an Anti-Austerity Measure

Published by Anonymous (not verified) on Tue, 17/11/2020 - 4:06am in

The federal government directly issues almost all student debt, and has the discretion to reduce balances completely, or anything short of that. Continue reading

The post Unsanitized: Student Debt Cancellation Now an Anti-Austerity Measure appeared first on BillMoyers.com.

Is Fear of AOC Why Chuck Schumer Is Pumping a Non-Starter “Cancel Student Debt by Executive Order” Scheme?

Published by Anonymous (not verified) on Mon, 09/11/2020 - 9:12pm in

It’s odd to see Democrats talking about a Biden “100 days” when Obama did nothing like that when he actually did have a mandate to do so that he ignored. Did they not get the memo that their blue wave didn’t hit the beach? It’s even odder to see Chuck Schumer affecting a Damascene conversion, […]

It’s Time for a Debt “Jubilee”

Published by Anonymous (not verified) on Fri, 18/09/2020 - 7:59pm in

Households and businesses are overloaded with debt. Richard Vague offers a set of proposals for how to restructure it.