Dive Brief:
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Securing a mortgage for a home is harder now than it was before the Great Recession, despite reports of improved credit availability, according to Housing Wire, citing a new report from the Urban Institute that looks at mortgage denial rates based on the share of low-credit borrowers rather than on lender wariness.
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The report looks at mortgage denial rates after exempting borrowers with perfect credit, focusing on those with less-than-perfect credit, since whether the latter group will be approved is more variable than whether the former will be.
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Loan denial rates are down overall because fewer less-than-perfect credit borrowers are applying, the report found, having been deterred by the tight credit market. Lower-credit mortgage applicants accounted for 33% of that market 2015 compared to 49% in 2006.
Dive Insight:
Mortgage rates are on the rise and are expected to be a key headwind facing buyers this year, according to a recent report by Zillow, which forecast the conventional 30-year fixed mortgage rate to hit 4.75% by the close of 2017. That rate has hovered around 4.2% to 4.3% so far this year, according to Bankrate.
Fannie Mae Chief Economist Doug Duncan warned earlier this month that despite an improvement in consumer sentiment since the November election, income growth nationwide will be required to offset the combined impact of higher mortgage rates and home prices.
For its part, the government is attempting to improve lending market conditions. Earlier this month, President Donald Trump signed an executive order calling for a review and likely scaling back of the financial regulations laid out in the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many housing market participants believe the legislation impeded bank lending and restricted individual mortgages.
This followed a Federal Housing Administration decision last month to trim the annual premiums most borrowers pay by a quarter of a percent, a move that Trump reversed by executive order less than two weeks later.
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