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Risk Assessment’s New “Playing Field”

Editor's note: This story originally appeared in the November edition of MReport, out now. 


When the COVID-19 pandemic took root in the U.S. in March, the mortgage industry was initially apprehensive over the prospect of an economic shutdown.

“No one had any idea as to what was going to happen with real estate appreciation or depreciation early on,” recalled William J. Tessar, CEO at Civic Financial Services in Redondo Beach, California, adding that the worst of the industry’s fears, thankfully, did not materialize. “What manifested itself early on was that the real estate market was actually okay.”

While the housing market was spared the worst of the pandemic's trauma, mortgage lending underwent some significant adjustments. Joel Kan, AVP of Economic & Industry Forecasting at the Mortgage Bankers Association, acknowledged that the pandemic changed the playing field in terms of credit availability.

“Lenders have tightened credit,” Kan said. “We’re at our tightest credit supply since 2014 and 2015, and a lot of that tightening has been in jumbo and government.”

Kan noted that after the pandemic started to wreck the economy, lenders began to require “a little bit higher credit scores and a little bit lower LTV, relative to the pre-pandemic.” But he also observed that the protocols put in place in the aftermath of the Great Recession proved problematic with the ongoing crisis.

“There is certainly a lot more stringency in the underwriting process,” he continued. “For the last few years, documentation and communication have been a priority. We faced a problem in April and May when the lender needed to verify income or employment, but the borrower’s employer was closed or working remotely.”

Click here to read the full story on the digital version of MReport's November issue.

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.

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