More U.S. banks are loosening home-loan standards than seen in the last two decades, Bloomberg News reports.
In the Federal Reserve’s July survey of senior loan officers released last week, the net percentage of domestic banks tightening standards for net prime mortgages was negative 18.3%, the most loosening since the Fed started asking the question by loan-quality category in 2007. Net prime mortgage loosening was also greater than the highest net share of banks easing in all mortgages in the 1990s or 2000s.
But standards are still not nearly as loose as they were leading up to the housing crash, Bloomberg notes.
A separate credit availability index created by the Mortgage Bankers Association shows how lending criteria for residential mortgages are still much more stringent than during the housing boom. The index, benchmarked to 100 in March 2012, shows that while credit availability climbed to 116.4 last month from 100 in March 2012, it approached 900 in the mid-2000s — signaling borrowing conditions were about nine times as easy.
The data for the index calculation is provided by AllRegs Market Clarity, a platform that provides underwriting guidelines from more than 85 investors into one place.
“The magnitude of tightening during the crisis was so extreme that it dwarfs recent changes,” Bloomberg cites JPMorgan Chase & Co. mortgage-bond analysts as saying. And, “just because a large percentage of survey respondents said that they were loosening standards doesn’t mean that they were loosening them by a large amount.”
The Fed survey also showed that recent regulation enacted by the Consumer Financial Protection Bureau (CFPB) has reduced approval rates on applications for some types of loans and mortgages.
Read the Bloomberg article here.
Written by Cassandra Dowell