Mortgage Credit Policies

Posted by Professional Realty on Wednesday, April 16th, 2014 at 7:25am.    1360 Views

A New High for Mortgage Availability, Concerns Continue

Ohio Homes Mortgage LendingAfter the financial and housing debacle of recent years, we've all been hoping for a big turnaround. In recent years we've seen most housing markets rebounding, with slow but steady and strengthening progress. However, mortgage availability with lenders has threatened to kill this progress having run scared for a good run with tight credit restrictions. So tight, in fact that many would be buyers were prevented from moving forward with the dream of home ownership.

Now it would seem, that lending policies, while still much (and responsibly) tighter than the sub prime fiasco of the past, have become reasonable enough for a much larger pool of home buyers. If the credit score is not quite where it needs to be it's not so far out of reach that a would be buyer can't fix it with a little time and attention to their unique credit and financial profile.

The Mortgage Bankers Association Index marked 114 in March, and the highest reading in the index's three year history. The MBA Index reading shows that buyers' access to mortgage credit is now at it's highest level of the last three years with expectations that buyer credit standards will loosen yet more before the end of 2014 but the industry and housing market still both have a way to go.

Conflicting Signals About Mortgage Credit

“I don’t think there’s any question that mortgage underwriting has gotten easier or is looser than it was two or three years ago, but it’s nowhere near where it was in 2005, 2006,” Guy Cecala, publisher Inside Mortgage Finance, told The Wall Street Journal. “We are talking about easing from extremely tight underwriting standards.”

According to the Federal Reserve’s recent senior loan officer survey nearly 17% of larger banks and lending institutions have recently relaxed their credit standards on prime purchase mortgages, 5.6% have tightened standards and the remaining left standards the same,  

Despite this "good news" some housing experts continue with expressed concerns that new rules for both lenders and borrowers this year would once again tighten and restrict credit access. According to the American Bankers Association recent survey, 80% of bankers expect a "measurable reduction in credit availability." On the flip side, the ABA's executive Vice President Bob Davis states he believes that those standards will lighten up as these lenders adapt to the new rules. “There will be a tendency for some liberalization over the course of the year,” Davis told The Wall Street Journal.

Personally, I prefer to refer  clients to a local mortgage broker, not a banker so my clients pay less in up front fees. Banks get excited when someone walks in asking for a home loan due to these added profits while mortgage brokers around here seem offer better deals. Interestingly, many buyers believe using their own bank where they have accounts is going to get them the best deal considering they're a current customer, but it's not necessarily true; shop around. Mortgage brokers around here (SW Ohio) on average will give a buyer a better deal on home loans and seems to me that locally, mortgage brokers have found surer footing while many local banks are still trying to find their "sea legs" in this current state of economy. Best bet is to do some comparison shopping as this landscape is constantly changing, and if you can buy, now is the time.

3 Responses to "Mortgage Credit Policies"

David wrote: Curious where you are coming up with your data to support the broker versus banker claims? I have rarely seen bank fees and points be more than a broker's. Any points that are being charged by a bank are typically bona-fide discount points that the borrower is choosing to pay to lower their rate. Please explain.

Posted on Wednesday, April 16th, 2014 at 8:30am.

Greg Hancock wrote: Hello there David,

And thanks for asking! Actually, I probably should add that to the body of the post, but I guess this reply will suffice. That data would be from in my own back yard, here in Ohio. As a local Realtor, and also as a manager of a team of Realtors that work with internet referrals in our own territory stories trickle in that banks here (SW Ohio) are more expensive than mortgage brokers in the area, even for those approaching their own banks. Sometimes it's the out of pocket initial expenses here that kill home ownership for those already struggling to come with down payments.

Real estate is a highly local phenomenon, and here we have a lot of small mortgage brokerages competing for business, and most of our Realtors in the area keep these lenders in their back pockets for their clients. Perhaps it's different where you are located. Though, the main point of the post being the loosening (and concerns) about credit restrictions across the board.

Posted on Wednesday, April 16th, 2014 at 8:49am.

Brian Goss wrote: Greg, you've made some excellent points. I recently bought a home and was very diligent about shopping around for the best deal on a mortgage. During my research, I learned that one bank touting "low interest rates" was charging higher overall fees and the other lender that was claiming "low closing costs" was charging higher interest rates. It all comes down to, "pay me now or pay me later." My Realtor, Marty Snyder was very helpful in making my real estate purchase a smooth transaction. He was wonderful to work with and he helped save me a lot of money in the process! (he even gave me several selections of lenders to speak with)

Posted on Wednesday, April 16th, 2014 at 9:44am.

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