Did Mortgages Just Get Easier to Obtain?
Fannie and Freddie’s latest lender guidance is “going to be big, but it’s going to take time” to see the full impact of the changes, Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute, told The Wall Street Journal. Earlier this year, the Urban Institute estimated that up to 1.2 million additional home loans would be made annually if mortgage availability was at “normal” levels.
Lending giants such as Wells Fargo and SunTrust Banks Inc. have said borrowers will likely see faster turnaround times on mortgage applications in the next few weeks. Some lenders also say they expect to broaden the range of borrowers they’ll accept by reducing credit-score requirements and making exceptions for consumers who faced a one-time financial event, such as a job loss or large medical bill.
“It’s providing greater certainty for all the parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” Mike Heid, president of Wells Fargo Home Mortgage, told the Journal.
However, some banks still are treading cautiously and aren’t ready to relax their underwriting rules quite yet.
“You won’t see us start to expand our criteria much past what we’ve done,” says Brian Moynihan, Bank of America chief executive. (Read more: Bank of America: We’re Not Easing Up)
U.S. Bank CEO Richard Davis says his bank also isn’t prepared to make any changes yet.
“Unless we are convinced that the rules are going to be permanent and there is not going to be a look back or a reach back in future times … we are simply going to stay on the sidelines in the concerns of both compliance risks and other uncertainties,” Davis told the Journal.
Source: “Mortgage Lenders Set to Relax Standards,” The Wall Street Journal (Nov. 28, 2014)