Lenders wise to beef up default-risk reserves

Part 1: Fixing the housing finance system

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(This is Part 1 of a five-part series. Read Part 2, "Borrowers, insurers would save with new mortgage insurance"; Part 3, "Mortgage insurance cheaper under new plan"; Part 4, "Help from feds not a bailout"; and Part 5, "Struggling borrowers get fresh start under new plan.") The housing finance system, while still functioning, is in a crisis state. Interest-rate risk premiums -- the rate increment on mortgages classified as riskier -- are two to four times as large as they were two years ago. Day-to-day rate volatility, which can cause havoc in the relationships between borrowers and loan providers, is larger than I have ever seen it. Underwriting requirements -- the conditions that lenders require to approve a loan -- have tightened across the board. Loans without a down payment, and loans allowing borrowers to "state" what their income is rather than document it, are pretty much gone. Loans are taking longer to get approved, ...