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Are banks in a lending mood?

Are banks in a lending mood?

Historically low mortgage interest rates and relatively low housing prices have created a real win-win situation for home buyers. But some would-be buyers have run into credit challenges with stricter lending standards. That could be changing, based on the quarterly FICO/PRMIA survey that measures the sentiment of lending among bank risk professionals, according to the Niche Report.

The survey shows that about 20 percent of the bank risk professionals questioned expect the approval criteria for loans to relax. That’s up from 12.1 percent in the prior quarter. The Professional Risk Managers’ International Association (PRMIA) conducted the survey for FICO, posting the following results:

  • 71 percent of respondents say home prices are “rising at a sustainable pace” in the context of mortgage lending risk
  • 39 percent of respondents expect mortgage delinquencies to decrease over the next six months
  • 59 percent of bankers expect the supply of credit for residential mortgages to meet demand over the next 6 months.

Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, said that while “mortgage lenders have been understandably guarded over the past five years…the improvement in their sentiment should be welcome news.” Jennings anticipates that more lenders will expand their mortgage and home equity businesses, but they will proceed with caution. This is a positive forecast for potential buyers with less than stellar credentials who can still demonstrate their financial ability to support a mortgage.