Lenders expected to ease credit standards

The move comes as a response to anticipated dull market conditions

Lenders expected to ease credit standards

Lenders are concerned over general economic conditions, and they are easing their credit standards to cope with the anticipated slowdown in market demand.

Fannie Mae said in an outlook report that more lenders expect to implement less stringent standards in the next three months for GSE eligible, non-GSE eligible and government loans as lenders report a drop in purchase mortgage demand.

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“The drop in purchase mortgage demand also reflects the latest finding in the Fannie Mae National Housing Survey, in which the net share of consumers who reported that now is a good time to buy a home dropped to a record low,” the government-sponsored enterprise also said.

Doug Duncan, senior vice president and chief economist at Fannie Mae said, “Expectations to ease credit standards climbed to survey highpoints in the second quarter as more lenders reported slowing mortgage demand and increasing concerns about competition from others.”

“Lenders cited additional contributing factors such as diminishing compliance concerns and more support from GSEs, including clarification on representations and warranties and tools that provide greater certainty during the loan underwriting process,” he added.

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Further, “Easing credit standards might also be due in part to increased pressure to compete for declining mortgage volume.”