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Is Getting a Mortgage Loan Becoming Easier?

applicationPerhaps the most important aspect of obtaining a mortgage loan is the borrower's credit score, but credit standards among mortgage lenders tend to change with overall economic conditions.

The Federal Reserve's January 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices shows that credit standards may be easing among lenders, but will this change be in the best interest of the industry?

According to the Fed survey, credit standards have eased moderately on some categories of residential mortgage loans, while demand for these loans weakened. During the fourth quarter of 2015, 11 of the 63 banks surveyed noted that credit standards on GSE-eligible loans had eased somewhat, while two banks said lending was tight somewhat. Government residential mortgages eased somewhat for four of the 59 banks questioned and tightened for four banks.

"During the fourth quarter, a moderate net fraction of banks reported having eased while a modest net fraction of banks reported having eased standards on QM jumbo and non-QM jumbo residential mortgage loans," the Fed stated. "Meanwhile, banks left lending standards basically unchanged for all other categories of residential real estate loans on net."

In terms of mortgage demand, a moderate net fraction of banks reported weaker demand across most categories of home-purchase loans.

The banks were also questioned about their expectations for lending practices and conditions for the rest of 2016, assuming that economic activity progresses in line with consensus forecasts.

"Modest net fractions of domestic respondents expect to ease their standards for GSE-eligible and nonconforming jumbo residential mortgage loans," the Fed said. "A majority expect interest rates to rise, and a moderate net fraction expects spreads over their cost of funds to increase. A small net fraction of respondents expects the volume of originations of GSE-eligible mortgage loans to decrease, while respondents expect the volume of originations of nonconforming jumbo residential mortgage loans to remain basically unchanged on net."

Click here to view the Fed survey.

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