Some banks are loosening their mortgage standards, and more bankers are expecting less stringent rules soon
In recent years, it’s been tough for many Americans to qualify for a mortgage loan. Now, there are signs that standards are gradually loosening.
The Federal Reserve’s newest survey of senior loan officers shows that almost 10 percent of banks have eased their lending standards for low-risk mortgages in the first quarter of 2013. That’s up from 5 percent reported in the previous quarter.
Also, nearly 20 percent of bank risk professionals anticipate the criteria for approving loans to become more relaxed, according to the most recent quarterly survey by credit reporting company FICO and risk management association PRMIA. In the survey’s three-year history, that 20 percent is the third-highest level ever recorded for eased lending rules.
While the 20 percent finding may be small, it’s still encouraging news to prospective borrowers, says David Crowe, chief economist of economics and housing policy for the National Association of Home Builders.
He says improving house prices and additional information from the federal government about lending rules are major factors. This ensures that “lenders and investors will know the risks they are taking on and be willing to lend to a wider array of borrowers,” Crowe says.
“It should mean that the more traditional mortgage borrower who was able to get a mortgage in the early 2000s, before credit standards fell, will be able to get a mortgage at a competitive rate again,” he adds.
Jean Segner, group vice president of mortgage client experience for SunTrust Mortgage, Richmond, Va., believes lending guidelines will become less stringent due to “increased confidence in the real estate market and banks eager to help clients with their financial well-being.” – Erik J. Martin