A Credit Thaw is Offering More Mortgage Options

After years of near frozen credit following the economic meltdown, U.S. consumers are finding it easier to obtain a home loan. Lenders were hit with billions of dollars in lawsuits and loan buybacks by Fannie Mae, Freddie Mac, and the U.S. government after the crash of the subprime mortgage market. Concerned that they would have to buy back future loans, lenders denied most applicants who lacked virtually pristine credit. Greg Gwizdz, executive vice president at Wells Fargo Mortgage, remarks, “Now that we know more of the rules than we did in the past, you’re seeing credit widening to a wider spectrum.” Indeed, new rules from the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau have recently clarified which mortgages will be safe from repurchase risk. Lenders are now required to verify a borrower’s ability to repay a loan, which was basically nonexistent during the swinging era of the housing boom. In addition, they must verify income and assets. Lenders are even getting creative now that the rules have been made clearer. Wells Fargo, for example, is offering its jumbo loan borrowers — mortgages for $417,000 or more — a new way to lower their monthly payments. This is because they hold these loans on their books instead of selling them to Fannie Mae or Freddie Mac. | Read More