Tough mortgage standards may be worse than meltdown
Overly strict standards that are preventing credit-worthy borrowers from obtaining home loans could hit the U.S. harder than losses caused by the housing meltdown, said Lewis Ranieri, “father” of the securitized mortgage market, at an industry event in Washington on Monday, according to a Bloomberg story.
MarketWatch / By: Ruth Mantell / October 28th, 2013
“If this legacy persists the consequences will be more profound for the country than the economic losses,” Ranieri said at the Mortgage Bankers Association’s annual conference.
Ranieri, who helped popularize mortgage-backed securities, also said the “irrational restriction and contraction of credit” is the “most truly unacceptable legacy” from the meltdown, according to Bloomberg.
“Fear and not fact is making credit tighter than it should be,” Ranieri said, according to Bloomberg.
Ranieri’s words echo another newsmaker: Federal Reserve Chairman Ben Bernanke. Bernanke has said that some improvement in lending standards was appropriate, but that it may be too hard to get a loan these days.
“It seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery,” Bernanke said late last year.
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