Lenders Easing Mortgage Loan Rules


SARASOTA, FLORIDA, October 21st, 2013 – Aspiring home buyers who have previously encountered difficulty in meeting the tough standards of banking institutions for mortgages may now be in a better position to have their loans approved, Sarasota Bay Real Estate reports. The full service realty company notes that a Federal Reserve survey in July showed that senior loan officers at domestic banks were mostly easing their lending standards for consumer loans, including those for housing.[1]

The firm says it shares some views in the property sector that this welcome development of lenders cutting some slack to borrowers is but to be expected. An economics analyst at the National Association of Realtors, for instance, observed that mortgage qualification standards went from “much too loose” during the housing boom to “overly stringent” with the onset of the property crisis.

Lenders need the revenue

Home Loans

Relaxing on some of the restraints has been fostered by the home loans’ excellent performance in the past three years. What are currently being underwritten are probably the safest mortgages that the lenders could make, according to James Grosfeld, former CEO at the homebuilder now known as the PulteGroup. Significantly, there have been substantial increases in the values of the homes collateralizing the borrowings with annual value appreciation estimates ranging between 15% and 50%.

The need of major mortgage lenders, like JPMorgan Chase and Wells Fargo, to boost their revenue augurs well too for lending standards to thaw a bit more, Sarasota Bay Real Estate says. The increasing demand for homes and its potential business for lenders is difficult to ignore, the realtor adds, noting that as per a Conference Board study this July nearly 4% of Americans expressed plans to purchase a home.

Higher lending onward

This positive development on easier home loan standards, coupled with better job prospects, prompted the Federal National Mortgage Association to predict a 21% increase in mortgage lending in the last half of 2013. For this six-month period, Fannie Mae estimates mortgage lending for home purchases will total $341 billion, which compares with the $282 billion in the first half.

For the whole year, it expects a 1.1% gain on U.S. residential mortgage debt to a total of $10 trillion, followed by a subsequent increase to $10.2 trillion in 2014.  It also foresees an 8% gain in home sales this year to 5 million units.

Responsible broker provides the key

Prudence, nonetheless, remains as one vital take on these foreseen sales gains amid the loosening of some of the restraints on mortgages, Sarasota Bay Real Estate says. It is still an imperative for prospective home buyers to secure the services of a trustworthy and responsible broker who can not only successfully walk them through a mortgage loan acquisition. The agent of choice should also provide them competent advice on how to avoid foreclosures, the realty firm emphasizes.

The company notes that although home loan defaults are abating, foreclosures still remain significant and recent declines still have long way to go before the situation normalizes. For July, Corelogic reported 49,000 completed foreclosures, down 8.6% from June and 25% lower than the level a year earlier. The research firm added though that a 57% drop from the current level is what would be needed for things to return to normal.