Mortgage Standards Are Easing, Fed Finds

August 5, 2014
Wall Street Journal 
mortgage lending news
Nearly one in four U.S. banks made it easier for borrowers with healthy credit to get mortgages during the second quarter, according to the Federal Reserve's quarterly survey of banks' senior loan officers.

The level of easing in mortgage standards marks the largest movement by lenders since the housing collapse nearly eight years ago. Mortgage standards are loosening amid sustained increases in national home prices and a drop in refinancing activity over the past year. The survey, conducted in early July, also shows that demand for prime mortgages has bounced back to the highest level in a year.

Even so, many lenders report that credit criteria are still too stringent, as a result of the increased expense of handling mortgage defaults, new regulations, and continued uncertainty over buybacks of loans found to have defective underwriting. Policymakers have expressed concern that tight credit standards could have a negative impact on housing recovery. Moreover, some economists point out that relaxed credit standards will not help consumers who have high levels of debt, damaged credit from the recession, or insufficient income to become home buyers.

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