by Calculated Risk on 10/13/2006 02:49:00 PM

Matthew Swibel writes in Forbes: The End Of Easy Money?

A lender of nontraditional mortgage loans will tighten its lending standards in response to "supervisory guidance" issued by a band of five government regulating agencies, led by the Comptroller of the Currency, signaling darker days ahead for the sub-prime credit market.

New Century Financial --an Irvine, Calif., sub-prime mortgage lender, said Thursday that "in light of recent regulatory guidance and the changing interest rate and housing environment," it will tighten underwriting standards; enhance "its process for confirming the income information on stated income loans"; and improve its disclosures to consumers. Almost 90% of the company's loans fall in the sub-prime category, while 17% of its loans are interest-only and 42% are so-called stated income (also known as a "liar loan" because it doesn't require pay stubs, W2s, tax returns or other Internal Revenue Service forms).
....
Now, many more lenders will follow New Century's moves--just don't expect to see the issuance of many press releases about the changes, notes Andy Laperriere, analyst at ISI Group in Washington. After all, adapting to the government's new rules will reduce demand for mortgage credit and hurt bank profits.

Note: Swibel was correct about the timing of the new Guidance.