Sunday, November 30, 2014

WSJ: "Mortgage Lenders Set to Relax Standards"

by Bill McBride on 11/30/2014 10:16:00 AM

These are the changes (mostly to reps and warrants) that FHFA Director Melvin Watt discussed in October: Prepared Remarks of Melvin L. Watt, Director, FHFA, At the Mortgage Bankers Association Annual Convention

From Joe Light at the WSJ: Mortgage Lenders Set to Relax Standards

Some of the largest U.S. mortgage lenders are preparing to further ease standards for borrowers after the release of new guidelines this month from mortgage giants Fannie Mae and Freddie Mac.
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Some lenders, including Wells Fargo & Co. and SunTrust Banks Inc., said borrowers should begin to see initial changes in a few weeks, including faster turnaround times for mortgage applications to be processed.
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After the financial crisis, Fannie and Freddie made banks repurchase tens of billions of dollars in loans that the companies said didn’t meet their standards. In turn, many lenders stopped making loans to all but the most pristine of borrowers.

In many cases, they required borrowers to have substantially higher credit scores and put in place other measures—so-called credit overlays—that were more stringent than what Fannie and Freddie required.

With the new agreement, “I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays,” said David Stevens, president of the Mortgage Bankers Association.
This should make mortgages available to more people, but I expect the overall impact will be small.