Volume 2014 - Number 7
February 20, 2014
Lenders Not Slipping Back to Subprime but Getting More Comfortable with New Lending Rules, Industry Players Say
So much has been said in recent days about a possible yet cautious return to subprime mortgage lending as lenders lowered their credit-score requirements for FHA mortgages and other agency loans with certain limitations. Industry participants, however, say todays subprime is a misnomer and certainly not the same toxic subprime mortgage product that pushed the U.S. financial system to the brink of collapse. Lenders are more cautious in the post-subprime era and they no longer practice risk layering on loans to borrowers with less-than-stellar credit histories as they did in the past, industry observers say. In the past, lenders combined risk layering with low credit scores, said Brian Chappelle, a mortgage industry consultant. Today, I would be shocked if any lender used Fannie Mae, Freddie Mac or the FHA as a vehicle for traditional subprime because they would be ignoring the possibility of repurchase or indemnification. Lenders today are...
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