Recently an article in the Wall Street Journal quoted the “credit freeze is starting to thaw”. Click here to view the WSJ article
While the terminology there is catchy, the current lending environment is simply adjusting to market conditions. There are three components at work here:
1. Home prices continue to rise. This mitigates risk in the housing market in general and gives banks/lenders more confidence to lend since the most important piece of collateral in a mortgage loan is the future value of the home. We see this in the form of new loan programs and certain guidelines/rules being relaxed or more exceptions being made to those existing rules. Jumbo lending has also picked up.
2. Transaction volume is down so sharply lenders are having to get creative to source business and bring in loans. During the refinance boom, 2011-2013, lenders and banks were funding loans at max capacity, struggling to keep up with demand since rates fueled refinance and purchase loans were steady. I am seeing lenders marketing obscure guidelines and loan programs, (seemingly coming out of the woodworks) that were readily available in the past, but werent used in the past, again because they were maxed out dealing with fixed rate refinancing.
3. With QM established, there is less concern of large scale federal regulation coming down the pipe and how it will effect lending. Many lenders and banks were hesitant to do anything outside the box last year as uncertainty surrounding the QM implementation kept them conservative.
One thing I know for sure is that the markets will continue to evolve and as they do the lending industry will adapt right along with it.
About the Author ~ Since 2003, Beau has been a mortgage professional and is a leading best broker in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage he is truly committed to serving the needs of his clients and raising the industry standards for integrity and transparency.
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