Experts Expect US Lending Standards To Fall in Next Three Months
The paradox between low mortgage rates and high lending standards has been a topic of much discussion of late. But industry experts are growing more positive about the tight credit underwriting standards and expect them to ease in the coming few months.
According to Fannie Mae's - the lending giant - latest Mortgage Lender Sentiment Survey, larger lenders expect credit standards to loosen up in the next three months as more financial institutions try to boost mortgage purchase activity before the end of the year.
The percentage of lenders who believe that lending standards will go higher hovered between 26 to 33 percentage points - a 33 percent decline, proving that more experts are bullish on the mortgage scenario of the immediate future.
"Historically, as lenders face a more competitive market for loan volume, it's not uncommon to see some loosening in the lending standards; however, this time, the easing will likely be around the edges," Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement.
"Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end," Duncan added.
Last month, a survey of 75 domestic banks and 23 U.S. units of foreign banks by the U.S. Federal Reserve revealed that there was a widespread ease in lending on the increasing demand for mortgages.
"Survey results showed a continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand," The Fed was quoted by Bloomberg.
More recently, Wells Fargo also cut its lending standards for condominium purchase mortgages.
"We're tweaking our condo [condominium] approvals to make them more consistent with what Fannie [Mae] and Freddie [Mac] allow," Franklin Codel, head of mortgage production at Wells Fargo, said in an interview with the Financial Times.
"The theme of this year is expanding our credit box, we want to offer lending to a broad set of consumers," Codel added.
Wells Fargo's decision to ease lending standards comes just after it released a report that highlighted reasons why Americans weren't buying homes yet.