Mortgage loans a 'bit easier' to get, CUNA's Hampel to WaPo
April 17, 2015
WASHINGTON (4/20/15)--Financial institutions have stricter standards in underwriting mortgage loans than a decade ago, but mortgages are still attainable for many consumers, CUNA Chief Economist and Chief Policy Officer Bill Hampel told the Washington Post in a recent article.
"People typically underestimate the likelihood of getting a loan," Hampel said. "There's no question that it's harder today to get a loan than it was 12 years ago, but it's a little bit easier than it was three years ago."
One reason for the stricter requirements are the rules set by Fannie Mae and Freddie Mac for the conventional loans they buy and package for the secondary market, Hampel said.
"If a lender plans to sell their loan to Freddie Mac or Fannie Mae, then they have to meet their requirements, which are pretty uniform across all lenders," Hampel told the Washington Post. "If a loan goes bad at some point after it's been sold, then Freddie Mac and Fannie Mae can go back to the original documentation to look for a mistake. If any mistake has been made, the lender can be forced to buy back the loan."
That rule gives lenders reason to be more strict with their underwriting standards, Hampel said.
"The exception is that some lenders hold some or all of their loans in their own portfolio and don't sell them to investors," Hampel said. "In that case, the lenders have greater flexibility in making decisions about a loan approval because they are only answering to themselves."
As an example, Hampel said a loan might be approved for an applicant with a debt-to-income ratio that is a little high, such as 45%, but who has a high credit score and is making a down payment of 20% or 30%.