What are your thoughts? I’d like to hear from homebuyers, sellers, realtors, loan officers, title and escrow professionals, builders, etc. Do you think that lending requirements are starting top open up?
Filed in Mortgage News by cspraggins
The press release for Ellie Mae’s September 2013 Origination Report is subtitled “Purchase Loans Share Continues to Grow as Credit Standards Loosen,” which is news that should please potential homebuyers or those looking to refinance.
[Also on the Homeblog: Tight lending standards in absence of buyback clarity stifles housing market recovery]
In the press release, Jonathan Corr, President and Chief Operating Officer of Ellie Mae, stated:
“The credit standards also continued to ease in September with average FICO scores for closed loans dropping to 732 compared to 734 in August. September’s averages were 15 points below where they were at the beginning of the year (January 2013) and the lowest level since we began our tracking in August 2011.”
Banks ease lending requirements
Corr also noted that “31% of the closed loans in September 2013 had FICO scores under 700 compared to 17.46% of closed loans in September 2012” and that the debt-to-income ratios rose again slightly in the previous month.
This information is especially welcome considering that the “October 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices,”which is compiled by the Federal Reserve, reported that “banks, on average, did not substantially change standards or terms on lending to households,” when data were reviewed for the previous twelve months.
So, is it possible that things have changed noticeably in the past few months or so? Maybe. According to the Census Bureau, the homeownership rate reached 65.3% in the third quarter,up from 65% in the second quarter after falling over the previous three quarters—which could be a sign of banks easing up on lending requirements.
Additionally, according to a report released Nov. 13 by LendingTree, the US average down payment percentage fell to 15.73% in the third quarter of 2013, which also indicates that standards are loosening up a bit.
If banks are loosening standards, now may be a great time to think about purchasing a home or refinancing, considering the Federal Reserve’s recent announcement that it won’t be raising interest rates just yet. Andcome January, The Consumer Financial Protection Bureau will be instituting new lending standards that are bound to make it more difficult to qualify for a mortgage despite plateaued interest rates, especially for the self-employed, those who have been displaced during the recent recession, and first-time homebuyers.
[Also on the Homeblog: New Home Loan Hurdles and How to Jump Them]
Considering the mixed messages coming from the market, the savvy potential homeowner or individual looking to refinance should keep a careful eye on the news, and more importantly, do all the things we’ve always been told will make for a more qualified borrower—reduce debt, pay bills on time, save as much as possible, and (if you can help it) don’t switch jobs anytime soon.