Federal Reserve Mortgage Banking Survey: Credit Standards Loosening

If you have postponed purchasing a home due to concerns about securing a mortgage, a recent Fed survey indicates getting a home loan may be getting easier.

When the housing bubble burst in 2008, the news media ran countless numbers of stories about the stringent credit requirements imposed by lenders when evaluating mortgage loan applications. It appeared that the pendulum had swung from the extreme of “liar’s loans” to the need to have an impeccable credit history, reams of documentation, and a significant amount of luck to secure a home loan. As a result, many people decided to continue renting or stay in the current home because they thought it would be impossible to secure the mortgage financing they needed.

According to Bloomberg Businessweek, the results of a recent Federal Reserve survey of major mortgage lenders found that 40 percent reported they are loosening their standards for prime mortgage applicants. While some people may find this surprising due to new rules that went into effect this year that increases the lender’s responsibility in assessing a borrower’s ability to repay the loan. The reason for the shift is that the new rules provide lenders “safe harbor” for loans backed by Fannie Mae and Freddie Mac. On the other hand, those who apply for non-conforming mortgages, such as jumbo loans, are likely to find lending standard remain much more stringent that they were ten years ago.

For the best rates and terms for mortgage financing, contact a local mortgage broker to review you credit history and other factor that affect the likelihood your mortgage application will be approved.