Fitch Jumps on the ‘Too Tight’ Underwriting Bandwagon

Mortgage originators must loosen their tight loan qualification standards for a true housing recovery to take root, according to a new research note from Fitch Ratings.  

Fitch reached its conclusion after analyzing home sale inventory figures compiled by Realtor groups, and existing home sales numbers.

The rating agency cited national increases in previously owned home sales and reductions in the inventory of units as signs that a recovery in the residential real estate market is continuing.

But, Fitch also cites a recent speech by Federal Reserve chairman Ben Bernanke who recently noted that tight underwriting standards on home mortgages are keeping qualified consumers from purchasing a home.

The firm adds that regional differences in the foreclosure process are slowing progress and hampering meaningful improvement. Local unemployment rates will also have an effect on the recovery of home prices, Fitch said.