Demand for prime purchase mortgages picked up over the past three months and a few banks relaxed their credit standards, according to a new Federal Reserve Board survey of loan officers.
The April survey found 28 of the 64 respondent banks reported “moderately stronger” demand for prime purchase loans since January. About an equal number of small and large banks experienced this increase in applications from homebuyers.
Five large banks and one small bank eased their credit standards “somewhat” on prime loans. “Lending standards for nontraditional loans was little changed,” the Fed said.
Fed officials also tried to discern changes in lender willingness to make Fannie Mae or Freddie Mac loans based in a range of credit scores and downpayments.
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The appetite for GSE lending didn’t register a significant increase until the borrower has a 720 FICO score and 20% down. Putback risk on GSE loans is a “very important” factor for 45% of the banks surveyed.
Meanwhile, Federal Housing Administration lenders remain wary of borrowers with FICO scores of 660 and less.
Only five of the 55 FHA-lender respondents said they were “somewhat more likely” to approve borrowers with such a low FICO score than a year ago.
