Quiet crash in mortgage bonds

In an interview with CNBC, Jeffrey Gundlach, CEO and CIO of DoubleLine Capital, said while other forms of credit and assets have improved since the recession, mortgage credit has been in a quiet crash for the past six months to a year. Gundlach said stocks have rallied, junk bonds in the corporate world have strengthened and emerging market debt has increased. But mortgage credit has not shared in the rally, and the ABX Index, which tracks the performance of mortgage-backed securities, has dropped 35 percent in the last year.

According to Gundlach, the housing market has been stuck in a state of perpetual defaults and weak recovery rates. Regions that were financed by subprime loans or have lower property values have struggled the most and show the smallest signs of recovery.

Mortgage lenders are making changes to their lending practices in response to increased regulations and oversights from state and federal officials, that could further depress mortgage credit. Starting in 2012, borrowers applying for a home loan will have to provide more personal information and meet stricter requirements to qualify for a mortgage, the Chicago Tribune reports.

The news source reported lenders will be looking at a more well-rounded picture of borrowers' finances beyond their credit score when giving out mortgages. Other information that will affect a homeowner's ability to obtain a home loan include payday loans, evictions, child support payments, status of rent and cellphone payments.

More News