Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Lender Shortage Impeding Housing Recovery: Citigroup Inc. (C), Bank of America Corp (BAC), Lowe’s Companies, Inc. (LOW)

Page 1 of 2

The rise in mortgage rates since the beginning of the year has been a concern for the US housing sector, particularly when the Fed is doing its best to keep them at their lowest. An imbalance between the supply and demand for mortgages is believed to be one factor for higher mortgage rates this year. While creating the balance might take some time, it is not without its risks. This imbalance is impeding a speedy housing recovery. Therefore, I am bearish on companies that provide home improvement products, building materials and supply makers.

Citigroup Inc (NYSE:C)

Why A Lender Shortage?

Before the credit crunch of 2008, ample funds available for housing were available for all sorts of borrowers. However, the same is not true post credit crunch. Most of the lenders who were spreading funds back then are either underwater or gone out of business. In addition, most of the major mortgage lenders, including Citigroup Inc. (NYSE:C) and Bank of America Corp (NYSE:BAC), are shying away from lending, because they are burdened by MBS liabilities.

According to Inside Mortgage Finance, the market share of the largest five lenders came down from 66% in 2010 to 53% in 2012. The situation has given rise to shortage of willing mortgage lenders, particularly at a time when the Fed is doing its best to support the recovery of the US housing sector. The lack of supply and the ramped up demand, as a result of the Fed’s efforts, could be one factor behind relatively higher mortgage rates this year. Such a demand/supply dynamic could impede the housing recovery.

Risk Inherent In Balancing The Supply Dynamics

New smaller players have entered the field to balance the supply dynamics, however, until they fill in the void, mortgage rates will continue to climb as indicated in the Mortgage Bankers Association’s latest survey. Therefore, an opportunity lies ahead of the younger participants to spread funds.

However, this could also indicate a return of risk taking. Independent mortgage companies and community banks that are originating mortgages are making more use of FHA than larger banks. Further, the less seasoned management at these smaller players, raises the question that whether the lessons of the credit crunch are forgotten already.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!