With fewer home owners refinancing
their mortgages because of rising interest rates, banks may soon relax
their lending standards to ramp up business, according to the Mortgage
Bankers Association.
Credit availability has risen 3 percent since May — when mortgage
rates began to rise — according to an MBA survey. Refinances have fallen
59 percent from a year ago, but applications for home purchases have
risen 5 percent.
In recent years, tight underwriting standards have been blamed on
shutting out many people from the housing market. Many potential
borrowers have been unable to meet requirements for higher credit scores
and larger down payments in order to qualify for a loan.
"As volumes slow, it makes sense that originators might ease some of
their overlays as they now have the additional bandwidth to focus on
slightly lower-quality loans or those loans that require more intense
underwriting prior to approval, such as loans for self-employed
individuals or investors that own multiple homes," Craig Strent, CEO of
Maryland-based Apex Home Loans, told CNBC. "Competition for loans,
particularly for home purchases, will continue to rise as refinances
wane and originators look for continued loan volume to support the
infrastructure they put in place during the recent refinance wave."
Source: “Higher Mortgage Rates May Mean Easier Credit,” CNBC (Aug. 5, 2013)