Regulators Ease Up Rules on Mortgage-Lending. As of Tuesday, regulators are agreeing to drop a proposed a 20% down-payment requirement, which is the norm for high-quality mortgages.
Mortgage credit has been super-tight for years, preventing many folks with poor credit from securing a loan. Now, with mortgage-lending standards easing up in a slowing housing market, consumers will be able to readily access credit – further propelling recovery. Regulators have voted to require only bank documents, which state the burrowers’ ability to repay a loan, given their estimated debt. Regulators stood against the 20% down payment, and instead, focused on lenders verifying a burrower’s ability to ensure their debt-to-income doesn’t exceed 43%.
The fed’s are focusing efforts on Fannie Mae and Freddie Mac, with plans to expand credit using these two giants. The Federal Housing Finance Agency, stated that these two are planning to guarantee some loans with down payment’s of as little as 3%.
In the mid-Atlantic, home sales are slightly up, with units sold up .56% from 2013. The average price of homes has dropped -1.58% and have been on the market 11.67% longer. Lending has been weak this year, mostly due to a drop in refinanced loans. According to the Mortgage Bankers Association, national lending for home purchases will fall 13.5% this year to $635 billion, down from $734 billion in 2013.
Real estate groups and consumer advocates have fretted that the credit limits have gone too far.
The private-label market for mortgaged-backed securities, which issued just $27.8 billion last year – a whopping 2% of the $1.58 trillion in mortgage securities issued. Many say that private-label mortgage securities may not recover for some time. Even those offered FHA-insured loans to first-time homebuyers are becoming a struggle, notably due to high cost of the insurance.
What do you think? What needs to happen for this to be a successful recovery? Leave your comments!