Many Americans interested in buying a home right now are facing a lack of available credit, and now industry insiders say that conditions may begin to tighten.
The reason that many mortgage lenders have kept it somewhat difficult to obtain this type of financing is two-fold. First, many may still be wary of the ability of even creditworthy consumers to not default on their home loans the way so many did during the financial crisis. Second, is that the federal government’s rules related to the mortgage market from the wake of the financial meltdown are just now beginning to go into effect, and more regulatory changes might be on the way, according to a report from Bloomberg Businessweek.
David Stevens, the CEO and president of the Mortgage Bankers Association, recently cautioned that continual regulatory changes will likely only lead lenders to continue keeping mortgage credit restricted.
“I actually think credit is going to get tighter before it gets easier,” Stevens told the news agency. “[More regulation is] just literally hitting the entire marketplace now. The cumulative impact of correcting against an era of really bad mistakes that were made in the marketplace is being felt by the entire housing-finance-related infrastructure right now.”
Provisions from the Dodd-Frank Act of 2010 recently took effect, and a number of other changes, including one recently put forward by the Consumer Financial Protection Bureau related to the ways in which lenders must verify borrowers’ ability to repay, could come before the end of the year. Lenders are therefore keeping the types of people to which they will grant such financing as tight as possible in an effort to avoid running afoul of federal regulators, in addition to also doing it to better protect themselves financially from delinquent and defaulted home loans.
Consumers who are in the position to obtain mortgage financing will likely find themselves facing extremely high affordability thanks to low interest rates and prices that are still down significantly from those seen prior to the recession, and those conditions are expected to continue for some time.