 |
 |
|
 |
|||||||||||||||
 |
|||||||
|
 |
Qualifying for a Mortgage Becomes Harder, Even for Applicants with Good Credit, As Banks Probe Deeper Into Personal Finances By RUTH SIMON The Wall Street Journal, May 15, 2007 Mortgage lenders are beginning to scrutinize borrowers more closely, causing some loan applicants, even those with good credit, to face higher costs and more hassles. As the number of delinquent mortgages climbs, lenders have tightened their standards for issuing loans, including such well-publicized moves as raising minimum credit scores and cutting back on 100% financing and low-documentation loans. Now, some lenders are probing more intently would-be borrowers' finances. They are taking a tougher look at how much the property a borrower wants to buy is worth. They are peering further into clients' pasts for credit problems and requiring more in-depth reviews of borrowers who say they are self-employed. Some lenders are taking a harder stance when it comes to whose credit score a couple can use when applying for a mortgage, rather than simply allowing them to use the higher of the two scores. "There's no question that [lenders] are digging deeper," says Doug Duncan, chief economist of the Mortgage Bankers Association. "The pendulum is swinging a little farther to the conservative side," he says. Tighter lending standards are adding pressure to an already soft housing market. Last week, the National Association of Realtors forecast the first annual decline in the median price of an existing home since the group began tracking home prices in the late 1960s, in part because mortgages are more difficult to get. Increased scrutiny by lenders is meant to weed out problem loans and reduce mortgage fraud. But it also can inconvenience borrowers. Mortgage lenders say they are tightening standards in response to pressure from mortgage insurers, investment banks and investors who buy mortgage-backed securities. Spooked by rising delinquencies, Wall Street is now pushing lenders to beef up their underwriting. Bear Stearns Cos.' EMC Mortgage unit, which buys loans from mortgage lenders that are then packaged into securities, is running each loan it receives through a computer model to ensure that the appraisal submitted with the loan application provides an accurate measure of how much the home is worth. If the appraisal comes in too low, the lender may have to hire an independent reviewer. EMC is also asking for e-mail addresses and cell phone numbers for borrowers, information it hadn't requested before, and is calling borrowers who have adjustable-rate mortgages to make sure they understand that they have an ARM that will eventually reset. The increased attention to appraisals and other underwriting policies follows a period when lenders made it increasingly easier for borrowers to get a mortgage. Often borrowers didn't have to document their income or assets, even if they had relatively low credit scores. Looser standards weren't much of a problem when home prices were climbing. But as the housing market has cooled, more borrowers are winding up in trouble. The mortgage delinquency rate climbed to 2.87% in the first quarter from a recent low of 2.03% in late 2005, according to Equifax Inc. and Moody's Economy Inc. Some lenders are also doing more to ensure that the property is as described by the borrower. For instance, they are checking Web sources such as craigslist.org to determine whether a second home is really an investment property, which is considered riskier. Lenders are also delving deeper into borrowers' employment and credit histories. Michael Moskowitz, president of Equity Now Inc., a New York based mortgage lender, says in recent years lenders would often look back just 12 months at a borrower's mortgage payment history. Now, he says, they are looking at two years' of mortgage payments and reviewing information on credit card payments and installment loans. |
|||||
|
|||||||
