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Source: Mercury News
Date: 8/18/2008
Authors: Leslie Berkman
 
     

News Bite

Official: Loan criteria too tight now

Complaining that even many credit-worthy borrowers can no longer qualify for mortgages, the president of the California Association of Mortgage Brokers last week called for exceptions to underwriting criteria that tightened in response to skyrocketing foreclosures. The lending industry should create "sensible alternative loan products" that, for instance, would allow people with good credit but nontraditional income to buy homes, Fred Arnold said at a news conference. Among those who would benefit, he said, are firefighters who regularly work overtime and teachers with second jobs. Under today's underwriting criteria, he said, lenders frequently won't consider such supplementary income.

The expansion of the Federal Housing Administration's role in insuring home loans over the past year has made buying lower-priced homes easier for many first-time buyers. But Arnold said the withdrawal of private investors from the mortgage industry has reduced the range of products available. He said in particular, easier qualifications are needed for borrowers wanting jumbo loans for more than $417,000 but less than $729,700.

Arnold said he is not advocating a return to the ultraliberal lending practices of a couple of years ago . But he said the continued tightening of underwriting requirements is excessive because falling home prices have taken much of the risk out of the mortgage market.

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