New, Tough “Big Bank” Mortgage Rules Contrast With Looser HARP And FHA Streamline Programs
Mortgage approval guidelines are getting both looser and tighter. At the same time.
As programs like the new HARP II mortgage plan and the FHA Streamline Refinance break down barriers to refinance, individual banks are raising minimum mortgage standards nationwide.
After 2 Years Of Easing, Loan Approvals Re-Toughen Up
As part of its quarterly survey to member banks nationwide, the Federal Reserve asked senior loan officers whether last quarter’s “prime” residential mortgage guidelines have tightened, loosened, or remained as-is.
A “prime” borrower is defined as one with a well-documented, high-performance credit history; with low debt-to-income ratios; and who chooses to finance a home via a traditional fixed-rate or adjustable-rate mortgage product.
After a 2-year easing cycle, the nation’s biggest bank banks report that they’ve reversed course, and are raising the bar on mortgage approvals. For the period July-September 2010, 88% of responding loan officers admitted to tightening their prime guidelines, or leaving them “basically unchanged”.
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High Default Rates Affect Everyone
If you’ve applied for a home loan in the last 12 months, you’ve experienced “tight mortgage guidelines” first-hand.
High delinquency rates and defaults since 2007 have caused the banks to rethink what they will lend, and to whom. As a result, today’s mortgage lenders scrutinize applicant assets, incomes, and credit scores just to make sure that nothing “slips by”. And the depths to which an underwriter will dig are massive.
As compared to last year :
- Minimum credit scores requirements for a mortgage are higher
- Downpayment/equity requirements for a mortgage are higher
- Minimum debt-to-income ratio requirements for a mortgage are lower
Mortgage rates are the lowest in history right now but fewer applicants qualify. Plus, with the housing market slow to recovery, guidelines are likely to tighten further in 2012.
It used to be that underwriting exceptions were plentiful. Today, they’re a gift.
Low Mortgages Rates Don’t Matter When You Don’t Qualify
If you’re among the many Americans from California to Virginia wondering if it’s the right time to buy a home or refinance, consider that, although mortgage rates may fall, approval standards may not.
The best mortgage rate in the world won’t matter if you can’t get eligible to lock it.
Buyers Of Foreclosures Get The Same Mortgage Rates As Everyone Else
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