Having virtually disappeared in 2008, housing loans granted to U.S. households with a financial risk profile remake flourished. According to a study by John Krainer, an economist at the Federal Reserve Bank of San Francisco, these loans subprime currently represent 20% of total new loans granted overseas. This share is equivalent to that observed in 2006, before the financial crisis broke out, and when those loans were heavily allocated.
The economist said however that the number of assignments mortgages has narrowed considerably. "The writing of new mortgages has slowed considerably over the past two years.The net indebtedness of households backed mortgages has declined every quarter since early 2006 and is now negative for the first time since the 1970s.
A new type of loan subprime
John Krainer, however, stressed that "subprime" are different from current products subprime granted before the crisis. Now, "the three organizations provide mortgage refinancing semi unprecedented support to the housing market, owning or guaranteeing nearly 95% of new residential mortgages," says the Fed economist.
Banks are no longer transform risky loans into securities traded on the market as they do not have a government guarantee.Thus, the quality of securitized products is more controlled: the GSEs mortgage refinancing that are Fannie Mae, Freddie Mac and Ginnie Mae to ensure. "The securitization carried out parastatals were much more likely to include floating rate loans and accompanied by incomplete information on income and assets of the borrower," said John Krainer.
This increased control reduces the risks of securitization, a practice that is hardly used outside of such mortgages. The Economist points out, however, a drawback to the supervision of banking practices: this intermediation could hinder the return to normal housing market.
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