Advanced Search

Volume 29 - Number 51

January 17, 2013

New Rules Tighten Standards for Nonprime Loans, But Little Impact Expected as Few are Originated

A number of rules from federal regulators in the past two weeks aim to tighten standards for nonprime mortgage lending, including requirements for ability to repay, appraisals and escrow accounts. Industry analysts suggest that the standards would have limited subprime mortgage lending during the boom of 2005, but those markets were dried up long before the new rules will take effect. In setting new rules for the nonprime market, federal regulators have established criteria for “higher-priced mortgage loans.” First-lien HPMLs are those with an annual percentage rate of at least 1.5 percentage points above the “average prime offer rate” for similar loan types, and more than 3.5 percentage points for junior-lien HPMLs. Some $12.38 billion in higher-priced mortgages were sold...

Subscribers to Inside Mortgage Finance have full access to all its stories and data online. Visitors may become subscribers for full access or may purchase individual articles and data.

Subscriber Log In

If you are a current subscriber or already purchased this article, please login below.

Forgot your password?

Already subscribe but haven't registered for all the benefits of the website?

Subscribe

A weekly "must read" for industry executives. Thoroughly covers regulatory, political, legislative and market issues in the residential mortgage business.

 

Pay-Per-View

You can purchase this article for $50.00 without subscribing and always have access to it on insidemortgagefinance.com.

Pay Per View

Please contact Customer Service if you need assistance: 1-800-570-5744

Poll

What is it going to take to convince lenders to loosen the credit box (i.e., remove underwriting overlays)?

The recent rep and warranty changes announced by the Federal Housing Finance Agency should go a long way in protecting lenders from future buybacks and help expand mortgage credit.
There won’t be any significant elimination of underwriting overlays until the government stops seeking huge mortgage-related penalties and settlements from lenders.
There shouldn’t be any expansion of the mortgage credit box since looser underwriting is what caused the recent mortgage crisis.

vote to see results
Housing Pulse