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Why lenders won’t ease up on mortgage lending standards just yet

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Mortgage Professional America | 22 Oct 2014, 08:22 AM Agree 0
Despite recent efforts made by officials to ease uncertainties among lenders, the industry still has a lot to do before credit begins to expand.
  • Carolyn Bailey | | 22 Oct 2014, 09:40 AM Agree 0
    Greed was the primary component in the ongoing Great Recession. Unless lenders' actions are constantly scrutinized, we will have a repeat !

  • Graham Montigny | | 22 Oct 2014, 09:55 AM Agree 0
    Was it not Mr. Barney Frank of the Dodd-Frank fame who while Bill Clinton was in office told the mortgage industry to loosen its standards to create the ownership society in America? Lucy and the football is correct. The basic reality of the world is about 67% of people are up to the requirements of homeowner ship. You know, hold a job, mange your money, pay your bills, do a budget, fix things that break. Any more than this and the inevitable foreclosures will come. You cannot change human nature or behavior. You cannot legislate honesty and morality.
  • AppraisalPro | | 22 Oct 2014, 10:38 AM Agree 0
    An analysis of recent HMDA data shows that there is a HUGE gap in the approval rates between lenders. Some lenders have approval rates on non-conventional mortgages of as low as 11%, where the typical rate is between 60-80% from larger lenders.

    Mortgage TrueView found that just an additional 10% of approved mortgages would increase a lender's revenue significantly.

    There was a specific smaller lender with 3,700 mortgage applications, with only 12% (445 mortgages) approved. If that lender were to increase its approvals by 8% to just a 20% approval rate (740 mortgages), the lender would see an additional $150,000 in revenue (based on a conservative $500 profit per mortgage).

    Mortgage TrueView also looked at a larger lender. This lender had 150,000 applications and approved 93,000 mortgages (62%). The lender saw revenues of $46.5 million (based on the same conservative $500 profit per mortgage). If that lender increased its approved mortgages to 108,000 (just 10%), it would reach revenues of $54 million dollars.

    Mortgage TrueView believes the huge discrepancy between approval rates of large lenders and small lenders is based off three determining factors: bias in the approval process, borrowers aren’t qualified, but mainly – mortgage denials are due to the lenders’ process itself – and how they execute it.

    Lenders with higher mortgage approval rates – and higher revenues – tend to have very strong technology, or strong non-conventional lending programs (or both). The more streamlined the process – the more mortgages (ie more revenue) a lender is able to produce.
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