Mortgages have become notoriously difficult to obtain, even among some of the most creditworthy borrowers, and lending standards are unlikely to be eased any time soon, according to Federal Reserve Chairman Ben Bernanke.
Bernanke, speaking at a Chicago banking conference last week, said that while banks have made significant progress in overall lending (taking into account other forms of finance such as auto loans and credit cards), they are consistently extra cautious with regards to mortgage finance. Lending standards have become so tough that even those with the cash to make a 20% down payment can face problems when trying to obtain credit on a home.
Acknowledging the problem, Bernanke was quick to caution that there should be no return to the days before the housing crisis, when banks were issuing mortgages to just about anyone who asked for one:
"A return to pre-crisis lending standards wouldn't be appropriate. However, current standards may be limiting or preventing lending to many creditworthy borrowers."
Numerous economists and real estate professionals have cited the difficulty in obtaining a mortgage as one of the biggest hurdles to cross if a full housing recovery is to materialize, reports Reuters.
According to US Housing Secretary Shaun Donovan, it’s estimated that around 10% to 20% of creditworthy buyers are unable to secure a mortgage due to the current tight lending standards at present.
I also see the biggest gap for self employed borrowers who have excellent credit.
The biggest gap I see is for self employed borrowers who have excellent credit. Because they take very little income, they cannot qualify income wise. Years ago we had a loan that required EXCELLENT credit and if you were self employed and willing to put 10% down, you could state your income. Those loans have performed well and were not sub-prime loans.We need that original loan back available to restart our housing market for the $200 to $400k buyer (Texas). This would also stimulate home sales above and below this price range.
They are following the saying if you got bitten by a snake, you will be scared of a rope.
Either they are very flexible or very conservative BUT not in between. They wonder why the country is not doing well and the economy is not improving fast
We don't WANT to go back to the pre-crisis standards! How about just the pre-crisis reasonable standard of 28% of your income? WHY does the solution have to be extreme? Just go back to REASONABLE standards and we'll be fine.