Mortgage Underwriting Standards Less Strict in 2012

by Houston Agent

Mortgage underwriting has improved slightly, according to a new report from the OCC.

Lessening underwriting standards are the great white whale in housing’s recovery, and the 2012 Survey of Credit Underwriting Practices from the Office of the Comptroller of the Currency (OCC) is making some suggestions that the tide may be turning for home loans.

A survey of 87 banks with $3 billion or more in assets, the OCC’s study covered $4.6 trillion in loans as of Dec. 31, 2011, which is 91 percent of all the loans in U.S. banking.

Here’s what the OCC found for residential lending:

  • Of the 84 banks the OCC surveyed that offer residential loans, 10 percent reported easing their lending requirements, up from 8 percent in 2011 and the highest since 2007.
  • Sixty-five percent report their lending standards were unchanged, up from 52 percent in 2011.
  • And most notable, 25 percent said lending standards had been tightened at their institution, a 37.5 percent decline from 2011.
  • A look at previous years offers even bigger differences. In 2008 and 2009, not a single bank reported easing its lending standards, and from 2008 to 2009, the percent that tightened its standards rose from 56 percent to 73 percent.

Tom Huckabee, an agent with Keller Williams Conroe, said that though the data may suggest otherwise, from what he’s seen, financing is “definitely still tricky.”

Every deal, in fact, that Huckabee is aware of, has been pushed back because of lenders, normally because they require more information on the day of the closing. From a detailed trail on the buyer’s downpayment funds to a study of the home’s foundation by a structural engineer, Huckabee said he’s seen some “crazy” requirements from the banks, and he’s not sure when the lending environment will become more hospitable to buyers.

“I have no idea what’s going to bring the banks back to reality,” he said.

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  • Builder says:

    I’m seeing a little more investment in new homes. Not sure if it’s because people have paid off more debt and have stronger balance sheets, or the banks are just being nicer. Still no money for commercial projects though.

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