Industry News

Lenders tighten rules for nontraditional, subprime loans

Federal Reserve survey finds standards for traditional loans unchanged

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Most lenders haven't changed standards on prime mortgages in the last three months, but many are tightening requirements for nontraditional and subprime loans, according to a Federal Reserve survey of lenders. A "large majority" of lenders surveyed said standards on prime residential mortgages had remained basically unchanged over the past three months, with 15 percent reporting "somewhat tighter" standards. Of 44 originators of nontraditional residential mortgages (such as interest-only and payment-option loans), 45 percent reported a tightening of standards, with the rest reporting their standards had remained basically unchanged. Of the 16 lenders that originated subprime residential mortgages, more than half of respondents reported that they had tightened standards on such loans. Of the nine institutions that reported tightening standards on subprime residential mortgages, only one indicated that it had also tightened standards on prime residential mortgages. Five ...