Are Lending Standards Too Loose Or Too Tight

Dated: 06/14/2018

Views: 64

Image title

Are Lending Standards Too Loose…or Too Tight?

   First Time Home Buyers, For Buyers, Move-Up Buyers

With home values appreciating at record rates, some are concerned that we may be heading for another housing bubble like the one we experienced a decade ago. One of the major culprits of that housing boom and bust was the loosening of standards for mortgage credit.

In a study done at the University of North Carolina immediately after the crisis, it was revealed that:

“Lenders began originating large numbers of high risk mortgages from around 2004 to 2007, and loans from those vintage years exhibited higher default rates than loans made either before or after.”

A study by John V Duca, John Muellbauer, and Anthony Murphy concluded that those risky mortgages caused the housing crisis:

“Our findings indicate that swings in credit standards played a major, if not the major, role in driving the recent boom and bust in US house prices.”

How do today’s mortgage standards compare to those from 2004 to 2007?

The Mortgage Bankers’ Association tracts mortgage standards in their Mortgage Credit Availability Index (MCAI). A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. While the chart below shows the index going back to that period between 2004 and 2007 when loose standards caused the housing bubble, we can see that, though the index has risen slightly over the last several years, we are nowhere near the standards that precipitated the housing crisis.

Image title

Bottom Line

If anything, standards today are too tight and are preventing some qualified buyers from getting the mortgage credit they deserve.

Free List Of USDA Zero Down Payment Homes! Text “nodownpayment” To 210-361-5728


Blog author image

Charles Juarez

With my expertise in realty for both buying or selling a home in San Antonio, and surrounding areas. You have found the right resource for your real estate needs. Whether you are looking for a new hom....

Latest Blog Posts

Are You Thinking Of Selling Your Home

Are You Thinking of Selling Your Home? Competition Is Coming! Monday August 13th, 2018  For Buyers, For Sellers, Move-Up BuyersThe number of building permits issued for

Read More

5 Reasons Mortgage App Are Rejected

FINANCE Powered by5 Mortifying Reasons Mortgage Applications End Up in the 'Reject' PileBy Daniel Bortz | Aug 6, 2018 Peter Dazeley/Getty ImagesPicture this nightmare: You apply for

Read More

Existing Home Sales Cooling Off This Summer

Existing Home Sales Cooling Off This Summer [INFOGRAPHIC] Friday August 10th, 2018  For Buyers, For Sellers, Housing Market Updates, InfographicsSome Highlights

Read More

Supply Demand Will Determine Future Home Values

Supply & Demand Will Determine Future Home Values Thursday August 9th, 2018  For Buyers, For Sellers, Housing Market Updates, PricingWill home values continue to

Read More