Part 2/15:
Melody points out troubling parallels, notably the expansion of government-backed subprime lending through FHA programs. Currently, the FHA market is around 13-14%, up from roughly 7% previously. The increase indicates more borrowers with lower credit scores, which raises concerns about future defaults.
She emphasizes that banks are pulling back from lending, handing over more of the market to non-bank lenders, but the majority—approximately 85%—remains backed by government agencies like Fannie Mae and Freddie Mac. Meanwhile, around 12% of private, non-qualified mortgage loans are delinquent, with over 10% delinquency on roughly 15% of the market, masked by larger government-backed portfolios.