CALL INFO LINE: 801-859-6555
 Welcome to the Blog

2014-07-14 09:49:32
Tight Credit Hampers Recovery as Lenders Fear...

Tight Credit Hampers Recovery as Lenders Fear ‘Considerable Costs’, Fed Report Says

Posted: 12 Jul 2014 04:29 PM PDT

The housing recovery is still hampered by tight credit, a result of stricter loan standards and lenders fearing that “departures” from these new rules could result in “considerable costs”, according to a new report by the Federal Reserve of Boston. 

Single-family home prices have rebounded strongly over the past two years, and the rise in home sales in May offers some optimism, the report sais. But single-family construction and trend sales remain sluggish.

At the same time, originations of mortgages to purchase a home fell in the first quarter to their lowest level since early 2011.

With the onset of the housing crisis, banks and other lenders significantly tightened their criteria for making mortgage loans.

“Most visibly, they stopped making “subprime” loans to households with especially poor credit histories,” the Fed report says. “Households with FICO credit scores below 620 — a score that might be triggered, for example, by being 90 days late on a loan payment — essentially lost any access to mortgage borrowing. And lenders no longer allowed borrowers to take out a ‘piggyback’ second mortgage to make a down payment.”

Both lenders and borrowers have dealt with the tight credit market with the help of the Federal Housing Administration (FHA), which has grown rapidly since 2007. Congress authorized the agency to target a broader set of households in 2009.

In response, FHA increased the maximum loan it would guarantee to $730,000. Single-family purchase mortgages guaranteed by FHA grew from 300,000 in 2006 to 1.1 million in 2010.

During this same time period, originations of all other types of mortgages plunged. Consequently, FHA share of single-family purchase originations jumped from 5 to 44 percent.

Moreover, the FHA, the Federal Housing Finance Agency, the Consumer Financial Protection Bureau, and other government and private organizations continue contributing to a new regulatory framework, which is having the result of lenders getting tougher on a broader range of applicants.

“Lenders fear that departures from the evolving standards will result in considerable costs, including the forced buyback of loans sold to Fannie and Freddie and the rescinding of FHA mortgage guarantees,” the Boston Fed says. “The associated uncertainty has caused lenders to act as if strict interpretations of possible restrictive future standards will apply.”

Read the full report.

Blog Archive
2017-04-16 09:49:56
Population Growth Shifting Out of SL To UT County

2017-04-16 09:49:01
State’s economy fueling population growth

2017-03-10 16:03:59
CNBC ranks Utah No. 1 state for business

2017-03-08 10:24:12
Toughest & Easiest States for 1st Time Home Buyers

2017-01-04 10:39:50
Housing Market 2017: The Positives & Negatives

2016-06-14 10:31:17
Salt Lake Monthly Housing Report

2016-05-20 15:42:35
Who Pays the Highest Property Taxes?

2016-03-31 15:49:40
Cities to Watch: 2016's Fastest-Growing Places

2016-03-29 13:19:08
Salt Lake Quarterly Housing Report

2016-01-28 08:37:27
Park City 2015 Year-end Statistics Press Release

2016-01-18 10:50:31
5 Things to Never Say When Selling a Home

2016-01-11 11:46:49
The ‘Missing Link’ in Housing

2015-12-23 12:08:43
5 Real Estate Trends That Will Dominate 2016

2015-12-15 10:56:50
How Will Higher Rates Affect Housing?

2015-12-04 10:39:02
Big Expectations for Housing in 2016

2015-12-01 10:07:30
6 ‘Tacky’ Home Décor Trends

2015-11-10 11:31:23
Home Buyers Don’t Need to Fear

2015-10-28 09:48:58
Home Prices Rising at Faster Pace Than Inflation

2015-10-20 15:23:54
Scammers Using New Chip-Based CCs as Fresh Phishin

2015-10-09 10:13:25
3 Home Inspection Deal-Breakers

2015-10-06 14:42:40
The Next Three Months: Best Time to Buy

2015-09-17 10:30:01
How High Will Mortgage Rates Actually Climb?

2015-09-11 14:14:05
Best Day of the Year to Buy a Home

2015-08-24 08:28:04
Home Resales at 8-Year High as Buyers Act Before M

2015-07-31 11:21:43
Utah Economy Newsletter June 2015 Now Available

Click here to see ALL articles.

Comment on this Article

Your Name:
Your Email:
Verify:  Please enter the numbers shown to help eliminate spam.