The MReport Webcast: Friday 5/8/2015

The Senior Loan Officer Opinion Survey, issued in April 2015, asked banks to give their responses to new GSE guidelines that were issued on November 20, 2014. The Federal Reserve Board inquired about residential real estate lending and on the definition of life-of-loan representation and warranty exclusions. The survey focused on two variables: credit score and downpayment amount. In an effort to reduce uncertainty and increase transparency about the terms under which a secured mortgage would be taken back to the bank that created the loan, these policies were put in place by the Federal Reserve Board.

The banks’ chances of approving a mortgage loan varied in terms of credit score, according to the responses given in regards to the new GSE-issued guidelines. The banks were only given information on the credit score and the downpayment amount. Also in response to new GSE-guidelines, it was noted that mortgage applications were more likely to gain approval from a households with higher credit scores from banks and less likely to gain approval from households with lower credit scores.

A new bill has been introduced by presidential nominee Senator Bernie Sanders. The proposal is intended to prevent another costly taxpayer bailout and safeguard the economy by breaking up the nation’s largest banks. According to the new proposed legislation, banking regulators would have 90 days to identify commercial banks, investment banks, hedge funds, insurance companies, and other entities whose “failure would have a catastrophic effect on the stability of either the financial system or the United States economy without substantial government assistance.”