Smart SpendingSmart Spending

Mortgage borrowing is getting easier

Credit is not raining down on would-be borrowers, but it will be a bit more accessible this year.

By Marilyn Lewis Mar 13, 2013 12:23PM

At long last, the mortgage drought is winding down. Credit is not exactly raining down on would-be borrowers but it is definitely opening up.


News reports are pointing to the Federal Reserve's January survey of senior bank officers, which reveals a small but significant improvement:

  • Banks loosening mortgage guidelines -- 6.1%.
  • Banks tightening mortgage guidelines -- 1.5%.
  • Banks reporting no change in mortgage guidelines -- 92.3%.

Yes, it's a teeny bit of loosening. But Dan Green's Daily Mortgage Report says the change in direction is significant:

"The Q4 2012 survey marks the ninth straight survey in which fewer than 10% of banks tightened standards. Many more are loosening instead. It's a good sign for the 2013 home purchase market, which has shown strong buyer demand and rising home prices."

Image: Real estate agent (© Stockbyte/SuperStock)Green concludes: "Despite what you may hear from friends and neighbors, the nation's banks are no longer tightening their respective mortgage lending standards."


He also points out that mortgage software provider Ellie Mae is reporting a 5% increase in the number of purchase and refinance applications approved.


Reasons for reverse

Bloomberg reports:

"There's a continuing loosening of credit standards, and more importantly, demand for credit is up, said Sam Coffin, an economist for UBS in Stamford, Conn., the second-best forecaster of the unemployment rate over the past two years, according to Bloomberg rankings. All that is good for growth and jobs."

"Americans are finding it easier to borrow from banks, supporting consumer spending and business investment and helping fuel employment just as U.S. government budget cuts start to take hold," Bloomberg adds.


In the blog post "Credit spigot opens for U.S. borrowers," Moody's Analytics mortgage expert Celia Chen says that problems driving tight credit are "reversing":

  • Consumer credit quality is improving, increasing the pool of potential borrowers.
  • Policymakers, regulators and courts are ironing out the legal and regulatory issues that have cast a pall of uncertainty over the mortgage industry.
  • Mortgage interest rates will remain low.

"Credit will be more accessible to households this year, although still not back to normal," Chen says.


Interviewed by email, Cara Hawkins, a production manager at Ameripro Funding in Addison, Texas, names two more reasons why mortgage lending is loosening: More lenders are going back into the mortgage business, and investors have started buying their mortgages. A lot of lenders fled the mortgage business after the housing catastrophe.


FHA: The new subprime

Hawkins says:

"There are more players in the mortgage buying 'game' than in past years, which opens the door to looser credit standards because the appetite for loans on the secondary market is higher. While it is still fairly black and white when it comes to mortgage qualification, I am seeing an increase in more approvable loans than in past years because of the market opening up."

She also offers another reason for the credit expansion:

"FHA is the new 'subprime.' Lenders are becoming more adept at rescoring borrowers' credit and coaching them through the obstacles that may be keeping them from obtaining a loan. FHA isn't just for first-time homebuyers anymore but rather borrowers who may have had credit challenges in the past few years due to unemployment or loss of savings resulting in a low down payment."

Formerly delinquent borrowers are looking for ways back into mortgages, says  NBC News:

"A new survey of past clients, a website that assists borrowers in the legal pitfalls of strategic default, found that nearly 80% expressed a desire to buy a home again within the next 12 months. It also cites data by Moody's Analytics, showing that the number of eligible homebuyers who have had a previous foreclosure will be 1.5 million by the first quarter of 2014."

The average mortgage in 2012

While we're on the subject of credit, take a look at real estate blog Keeping Matters Current's use of stats (from mortgage automation company Ellie Mae) to describe the average mortgage loan in 2012:

  • Time to close -- 48 days.
  • Down payment -- 21%.
  • Credit score -- 748 (37% of 200 million Americans have scores of 748 or higher.)
  • Debt to income -- Monthly house payment, 23%; total household debt, 34%.
  • Interest rate -- 3.90%.

More from MSN Money:

Mar 13, 2013 2:54PM
"FHA is the new 'subprime ...well I see the US Govt has not learned from the housing mess they created in the first place...
Mar 13, 2013 6:16PM
The guidelines are not "loosening up".  This segment was done by people that have no clue what they are talking about.  I have been doing home loans for people for over 14 years and credit requirements are at an all time high and the costs are continuing to go up.  And before the uninformed people jump on me about the costs going up because we charge too much, that is not the case.  As a loan originator I make way less than I ever have with 2x-3x the amount of work.  All the costs increase can be attributed to the agencies raising all their fees. 
Mar 13, 2013 5:35PM

Is there no end to empty posturing.  This government, the banks and ALL their affiliations (mortgage brokers and law firms included) are ONLY concerned about their 'well-being'.  Self serving, dishonest, etc, etc. - frankly, all this rhetoric  is tiresome - nothing has changed.  With the 'ongoing acceptance' and support of these chosen behaviors (and the majority have chosen said behaviors) there will be no significant improvement or relief.


The desires expressed to have 'them' held responsible for the pain, struggle and grief they have caused hundreds of thousands of American citizens, unfortunately, falls upon deaf ears.  



Mar 13, 2013 5:27PM
Still MANY people that can't buy homes because of dents on their credit reports. People with stable income and pay bills on time. No house for you!
Mar 13, 2013 6:46PM
The only way to get the housing market going again is to loosen credit a bit.  I hope this happens because I'm getting ready to sell.  I hope this is my last stinking cold winter in NJ.
Mar 13, 2013 6:06PM
I called about a loan.  I may get it and I may not. Either way, the sun will rise and set.  If it doesn't, then a loan won't be my top priority.  I told the lady I don't care if she looks at my credit score but I told her don't tell me what it is.  I think it is good but if it keeps me from getting a loan, then I don't want to deal with that bank anyway.  So, we'll see how it goes.  If I get approved, I may or may not take it.  If I don't get it, that sun will still rise and set.  But, taxes are going up, insurance costs may double while Watermelon One will continue to fly and Congress won't accept a pay cut.  When America gets enough, they will stand up and tell Washington to shut up.  And, the waw will be on!!! Don't want to see it but I think it may be on the way.  If it takes that for Congress to listen, then that may be the way it has to be.
Mar 13, 2013 6:13PM
I wonder how long it would take Congress to shut down all credit score agencies if everyone would simply get up and walk out of any bank that mentions credit scores to potential customers.  I wonder.  I just wonder......  As for me, I simply do not care if my credit score is 100 or 1000.  I don't care. I don't know what my credit score is and I don't want anyone telling me even if they know.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.