During the last several years, regulations imposed on the mortgage industry have restricted the availability of credit to many borrowers. I am not saying that the industry should not be regulated, but rather, that the types of regulation that are put into place need to be sensible, and they need to be fair to the various players in the mortgage business.

The Federal Housing Finance Agency recently announced its plans to make more loans available for as little as a 3% down payment. This pledge sounds good, put upon closer review, it does not appear to be a game changer. There are plenty of low-down payment loan programs available, but it has become increasingly difficult for even well-qualified borrowers to access these programs.

While the housing market has seen improvement since 2008, and there are less underwater homeowners than there had been as recently as 2012, values are still not where they should be, in part due to the tough underwriting standards lenders are placing on files to ensure that they are compliant with federal regulations (that have nothing to do with a borrower’s ability to repay the loan).

Here are some additional reasons why loan originations will face downward pressure in the years to come:

1. Many homeowners refinance in 2012 and 2013 and have no need to refinance into today’s higher rates.

2. Many borrowers lack the equity needed to refinance.

3. Incomes have fallen 8.7% between 1999 and 2013, so it is harder for borrowers to afford mortgage costs.

4. Student debt levels are rising, which is making the qualification process more difficult because of the more strict debt-to-income regulations.

5. Existing home sales are down from 2013 levels, meaning that there are less properties to finance.

First Indiana Mortgage, LLC is a mortgage broker operating in the state of Indiana. Please visit our website at www.firstindianamortgage.com for a free rate quote, or to learn about the mortgage process.

During the last several years, regulations imposed on the mortgage industry have restricted the availability of credit to many borrowers. I am not saying that the industry should not be regulated, but rather, that the types of regulation that are put into place need to be sensible, and they need to be fair to the […]