Lending Standards Changed For The Better

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Peoples Home Equity shares news of recent lending standards that went into effect on December 1st.

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the increase in mortgage pre-approvals will only prompt more housing activity, higher price bids, and fewer days a home sits waiting to be sold.

Peoples Home Equity reminds readers that effective yesterday, December 1st, government sponsored enterprises have relaxed their lending standards.

Federal mortgage institutions Fannie Mae and Freddie Mac have clarified the mortgage origination process for commercial lenders. In addition they have lowered the down payment requirement for repurchase loans, and lowered the credit score requirement for applicants to be approved.

The new policies clarify what is and what is not misconduct in the lending business. Referencing the past Melvin L. Watt, a director at The Federal Housing Finance Agency (FHFA), said on October 20th “We know that the Representation and Warranty Framework did not provide enough clarity to enable lenders to understand when Fannie Mae or Freddie Mac would exercise their remedy to require repurchase of a loan.” Watt further stated “And, we know that this issue has contributed to lenders imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations.”

Under the new guidelines, commercial lenders are able to sell their loans to Fannie and Freddie under more lenient conditions. The Wall Street Journal, highlighted how the new rules would change the lending environment on November 28th in an article titled “Mortgage Lenders Set to Relax Standards” The shows that currently just 2% of new mortgage originations derived from credit scores of 620-639. In contrast 44.1% of loans originated from individuals with scores ranging from 700 to 779. However, thanks to the new Fannie and Freddie policies, credit score requirements are about to change. Bill Godfrey from Mason-McDuffie Mortgage Corp, in San Ramon, California said that now the company will lend down to 620, the limits for loans backed by Fannie & Freddie with private back mortgage insurance required.

Peoples Home Equity is also reviewing the new lending regulations and believes the housing market is about to become more competitive. Less strict standards, and clarity regarding misconduct means banks will be approving more American’s for home loans. In a housing environment where inventories are already short of demand, the increase in mortgage pre-approvals will only prompt more housing activity, higher price bids, and fewer days a home sits waiting to be sold.

If interested in obtaining a mortgage, contact a Peoples Home Equity loan officer today at: 262-563-4026

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Giorgio U Ferrero
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