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Getting a Mortgage Is Finally Getting Easier

The clock is ticking on the summer homebuying season, and there’s a bit of hopeful news for potential buyers: More banks are making it easier to be approved for a loan.

Every quarter, the Federal Reserve surveys senior loan officers at banks to gauge how they’re lending. In the July survey, almost 60 percent of large banks said demand for prime mortgages is increasing, and roughly 40 percent said they were loosening their credit standards for those loans. Overall, the survey found “the largest such movement by lenders since the housing bust hit nearly eight years ago,” according to the Wall Street Journal.

The Fed also asked loan officers about the slew of post-crisis lending rules that took effect this year. Almost 80 percent of large banks say the rules aren’t affecting how strictly they underwrite prime mortgages. This, the Fed says, is because the new rules provide a “safe harbor” for the most common types of loans, which are underwritten to standards set by Fannie Mae (FNMA) and Freddie Mac (FMCC).

Banks are pulling back on other types of mortgages though, including jumbo loans, which now require more careful underwriting. For example, more than a quarter of the large banks that have pulled back on prime jumbo loans say the most important reason they’re doing so is because they now must evaluate the borrower’s current and expected income.

The Mortgage Bankers Association has its own way of trying to measure mortgage availability, and it has also found that credit has eased recently. It released historic data that serves as a good reminder how relative this is:

Lending may be looser than at the bottom of the housing market, but it’s still got a way to go before reaching typical levels. Let’s all hope it never reaches the bubble peaks.


Weise is a reporter for Bloomberg Businessweek in Seattle. Follow her on Twitter @kyweise.

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