A survey of “mortgage industry leaders” by the Collingwood Group, a consulting firm led by several Washington insiders paints a grim picture for the mortgage industry in the year to come.
One cause lost business is lending standards that have remained stubbornly high as a result of increased regulation and compliance requirements that have actually served to decrease loan volume and dampen current business conditions.
The data suggests that given the current regulatory environment, lenders are slightly disinclined to lower credit score requirements in the near term. Some 37% of respondents ranked their likelihood of lowering credit score requirements a 5 or 6, indicating a neutral opinion.
“This illustrates the delicate balance that lenders must strike between maximizing loan volume while minimizing credit risk,’ the report said. “Lenders must weigh loosening credit to borrowers with lower credit scores and down payments to increase production against continuing with more conservative underwriting standards to prevent regulatory transgressions and potential enforcement actions.
Some 70% of the executives participating in the survey attributed a high to extremely high (7-10) correlation between increased regulation and the need to tighten mortgage credit. This indicates that there is a strong relationship between regulation and borrower’s ability to get a mortgage loan. A majority of respondents indicated that the current regulatory environment is discouraging looser mortgage credit availability and that they do not expect a drastic improvement in the market in the next six months.