) to expand mortgage credit availability, the focus on high-quality loans still remains a high priority for banks.
Bank of America CEO Brian Moynihan, for example, said at a recent investor conference the bank will require borrowers to make larger down payments "to make sure they can withstand the bumps in the road" of homeownership, according to
In October, the bank announced plans to allow borrowers to buy homes with as little as 3% down. However, Moynihan said he believes there’s not a “big incentive for us to start to try to create more mortgage availability
where the customers are susceptible to default,” according to Reuters.
Also last month, FHA Director Mel Watt and U.S. Housing and Urban Development Secretary Julian Castro pledged to help provide lenders more certainty
about when they would face liability for defaults on loans insured by the FHA.
The clarification is part of a broader push to unlock tight credit after lenders had to repurchase tens of billions of dollars in bad mortgages they sold to Fannie Mae, Freddie Mac and private investors. To avoid such costs in the future, lenders have put in place tight mortgage standards that intentionally overshoot Fannie and Freddie requirements. The result is one of the tightest credit markets Americans have seen.
Last week, the Federal Reserve published its latest Senior Loan Officer survey
where banks reported they weren’t planning to loosen their purse strings anytime soon. The survey showed most respondents indicated little change in standards and terms for other types of loans to households during October.
The pullback from banks has allowed nonbank lenders to boost their market shares. Specialized mortgage companies made 23% of all mortgage loans in the first six months of the 2014, up from 17% in the first half of 2013 and 11% in the same period in 2012, according to the Wall Street Journal.
Click over to read about how nonbank mortgage companies, like Carrington and Privlo, are stepping in to fill void.
Despite the recent push from the Federal Housing Administration (