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Fannie Mae: Lenders Will Keep Dropping Standards Despite Trending Close To Pre-Collapse Levels

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Fannie Mae: Lenders Will Keep Dropping Standards Despite Trending Close To Pre-Collapse Levels

Fannie Mae’s Q4 Mortgage Lender Sentiment Survey shows that lenders will keep loosening mortgage standards—and their current level already has regulators worried.

According to Fannie Mae, 16% of lenders have plans to cut standards for GSE-eligible loans, compared to 2% planning to tighten standards.

The same holds true for the past three months, where more lenders say they relaxed credit requirements than tightened them.

Currency comptroller Thomas Curry says banks are loosening standards to compete for clients, mirroring troubling trends that led to the 2008 global recession

Lenders’ lax standards could help homebuyers, though, who are finding digs more and more out of reach.

Fannie Mae VP and chief economist Doug Duncan says slow supply response, "limited inventory of starter homes on the market," and house prices outstripping incomes all point to housing being unaffordable.

Whether they can actually afford to make the payments—and what this will do to the market—is another issue altogether...