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Mortgage lenders are facing challenges in 2017 from rising interest rates, rising home prices and fewer refinances. These add up to result in less business.
The big question is should lenders relax credit standards to help qualify more homebuyers for financing? Here we go again.
Lenders were blamed for relaxed credit standards that led to the crash of ‘08. As a result, we got Dodd-Frank with the QM and ATR rules. Remember them?
Those rules required a lender to ensure a consumer’s the repayment ability for any mortgage financing.
Many consumer groups, legislators, and lenders argued that the new rules excluded many consumers from obtaining home financing. These arguments fell on deaf ears as long as rates were low, refi’s were booming and housing was available at reasonable prices.
The tide has turned. Rates and home prices are rising, homeownership is down, and refinances are all but gone.
Once again everyone turns to the lenders to find a way to help qualify more consumers. FHA financing, low down payment, conventional loan programs and specialized programs for low to moderate and first-time buyers ain’t doing the trick. So, now the call comes to ease credit standards.
But, how will lenders be protected from the ATR rules and required FHA certifications?
Easing of credit standards translates into:
- Lending to less qualified consumers
- Increasing the lender’s risk for non-performing loans
- Indemnifications
- Loan repurchases.
Been there, done that and don’t want to go there again, thank you.
Lenders want to lend. That’s what they do and how they make money. The additional rules and regulations have increased the cost to do so, but lenders have fought the good fight, complied with the rues and continued lending.
Now, they’re asked to once again stick their necks out and be in the line of fire.
Maybe they would take on more risk if regulators and FHA would “loosen the noose” so lenders can loosen their credit standards.
