Despite the recent economic improvement and continued prodding from Congress, banks aren't making loan approvals any easier yet.
Nationally, mortgage approval standards are tightening.
The data comes from a quarterly survey the Federal Reserve sends to its member banks. The Fed asks senior bank loan officers around the country whether "prime" residential mortgage guidelines had tightened in the last 3 months.
For the period July-September 2009:
- Roughly 1 in 4 banks said guidelines tightened
- Roughly 3 in 4 banks said guidelines were "basically unchanged"
Just one bank said its guidelines had loosened.
The Fed's survey mirrors what you'd expect from the underwriting updates from the FHA and from Fannie Mae and it becomes clear that mortgage lenders are much more cautious now.
What's impacting home loan approvals:
- Higher minimum FICO scores
- Larger downpayment requirements for purchases
- Larger equity positions for refinances
- Lower debt-to-income ratios
In other words, mortgage rates may stay low into 2010, but potential home buyers need to plan to meet new eligibility standards.
Acting sooner is probably better than acting later.
