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Is the mortgage credit box really loosening?

Federal Reserve survey tells all

The Federal Reserve sent out a survey to senior loan officers, asking about the status of mortgage credit, if it was loosening and how many consumers are applying for the products.

HousingWire readers saw this morning that mortgage credit standards loosened in October, especially among jumbo loans, according to the latest report from the Mortgage Bankers Association.

But while this report seems to show mortgage credit standards are loosening, 88.9% of lenders reported that mortgage credit for GSE-eligible residential mortgages actually remained the same over the past three months, according to the survey from the Fed. Another 11.1% reported that credit eased somewhat, the highest increase of all the mortgage types.

Credit standards for mortgage loans the bank categorizes as government residential mortgages remained the same over the past three months for 96.5%. Qualified mortgage non-jumbo loans, non-GSE-eligible mortgages, saw credit standards remain the same at 95% of banks.

Even among QM jumbo residential mortgages credit standards remained the same in 90.5% of banks, and even tightened at 1.6% of banks. Of the non-QM jumbo mortgages, those that are not GSE-eligible, 91.4% saw the credit standards remain the same, and 3.4% even saw standards tighten somewhat.

But while jumbo loans were the only category of mortgages to see a tightening of credit standards, more lenders reported a loosening of standards than those that reported a tightening. QM jumbo loans eased somewhat for 7.9% of lenders, and non-QM jumbo loans eased somewhat for 5.2% of lenders.

According to the Fed’s survey, therefore, GSE-eligible residential mortgages saw the most loosening of credit standards, while some jumbo loans even saw a tightening of standards. This summary discusses the responses from 69 domestic banks and 21 U.S. branches, found here.

What’s more, the demand for mortgages remained relatively stable. In every loan type, over 65% of banks said the demand for that product remained the same. Demand for QM jumbo residential loans saw the most increase with 27% of banks saying it grew moderately stronger over the past three months.

But it’s no wonder jumbo loans saw the most increase in demand. Home prices hit a new all-time high, finally surpassing the pre-recession peak, according to the Q3 2016 U.S. Home Sales Report from ATTOM Data Solutions, a source for comprehensive housing data and the new parent company of RealtyTrac.

In fact, home prices rose so much that the chances are high that the Federal Housing Finance Agency will raise the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2017.

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