Lenders Easing Up on Borrowing ‘Naughty’ List?

December 23, 2015 | Comments Off on Lenders Easing Up on Borrowing ‘Naughty’ List?


Good news: The new year likely will bring greater opportunities for home buyers trying to get a home mortgage. More lenders are reportedly easing up on credit standards, according to mortgage-financing giant Fannie Mae. What’s more, many lenders also report that they expect standards to ease more in the near future too.

For home buyers kept on the sidelines the last few years due to the tightening of credit, they may finally better their chances in 2016 of securing a mortgage.

Across all types of loan products, the share of lenders who expect to ease standards for government-backed loans increased to 16 percent and the share who expected to tighten dropped to 2 percent, according to Fannie Mae’s latest survey of 213 senior executives from 194 lending institutions.

“These current practices and expectations toward easing among lenders compares to a historically relatively tight mortgage credit standard base,” says Doug Duncan, senior vice president and chief economist of Fannie Mae.

While lending may ease up in 2016, affordability for first-time buyers and the shortage of homes on the market will remain big challenges.

“Lenders’ thoughtful easing of credit standards should help mitigate some of this affordability decline,” Duncan says.

Borrowers also may benefit in the new year from a new credit scoring model. Fannie Mae recently announced that it will start using trended data in looking at mortgage applicants, which will provide a wider look at a borrower’s credit history and could help lift some credit scores. For example, the percentage of consumers in the super-prime risk tier would rise from 12 percent of the population to 21 percent, according to a recent study by TransUnion. Super-prime borrowers tend to have the greatest access to new loans at the lowest pricing.

“We are a long way from returning to prerecession levels in terms of mortgage accounts, but changing consumer preferences for housing also may play a role in this slow recovery,” says Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit. “If the economy continues to perform well, we believe the net number of mortgages will increase over the next year.”

Source: “Home Mortgage Lenders Easing Up on Home Loans,” CNBC (Dec. 18, 2015)


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