Fed Survey Reveals Mortgage Standards Remain Unchanged

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Lenders have lowered their credit score requirements for mortgage loans in order to attract home buyers, but this has not made credit more accessible to borrowers. Overall, their standards remain unchanged. This was revealed by a survey carried out by the Federal Reserve in April 2014.

The survey involved 74 domestic banks and 23 foreign banks with operations in the United States. Out of the 74 domestic banks 70 responded to the question about changes in their mortgage standards. Out of the 70 respondents, 51 said that their standards remained unchanged. In 10 the standards were tightened and in 9 they were eased. As a whole, lenders have not made changes to their home loan standards despite some attempts for their lowering intended to attract more demand in the short term.

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The survey has revealed tightening of the standards for nontraditional and subprime mortgage loans. Out of all respondents, 8 said that they tightened their nontraditional residential mortgage standards somewhat while 3 said that they tightened them considerably. Out of all respondents, 7 responded about their standards regarding subprime home loans. One of the participating banks said that their standards tightened somewhat while 2 responded that they tightened these standards considerably.

In the prime mortgage sector standards remain pretty much the same. This is backed by the credit score data on approved loans. In March 2014, the average credit score across all originated mortgages was 752. For comparison, it was 758 in March 2013. The average credit score for FHA loans was 686 compared to 697 a year earlier. Even though the decrease in the credit score for FHA loans is considerable, the demand for these mortgages is falling due to the higher cost. Their share in the total number of originated home loans fell from 50% in 2008 to 20% in 2014.

The unchanged mortgage standards are likely to have a negative impact on the demand for these loans especially given the rising mortgage rates and house prices.

Mailynne

Mailynne

Mailynne serves as a content strategist and writer for mortgage.info. She is ahighly task-oriented strategic planner and experienced writer. Over the past 10 years, Mailynne has managedcontent for both large corporations, non-profits and businesses. She specializes in managing digital marketing,branding and web development content. Mailynne has worked with a variety of local, national and international organizations.

Contact: mailynne@mortgage.info
Mailynne

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