Forecast Shows Give in Loan Underwriting, but Less for FTBs

There has been some slight loosening in loan underwriting, but it has been somewhat counterbalanced for first-time buyers by increased Federal Housing Administration loan restrictions and costs, a Fitch analyst told listeners as part of a housing and homebuilder forecast teleconference Tuesday morning.

“In sum, it has become more challenging for entry-level buyers to qualify for FHA loans,” said Robert Curran, managing director and lead homebuilding analyst at Fitch.

More broadly there has been some loosening in underwriting, Curran said, citing the recently established Mortgage Credit Availability Index’s increase to 109.8 in June from 108.9 in May, and indications in a Federal Reserve survey that a small number of banks have eased lending standards.

Also, he cited the fact that some credit unions are offering 100% financing to borrowers “with at least average, or more likely somewhat above average credit histories.”

But for new homebuyers access to financing is still limited, he said, citing both higher barriers to FHA loans and the involvement of institutional investors in the market who have had a “somewhat outsized role in its recovery” and have been “often squeezing out first-time buyers with cash purchases.”

Higher interest rates and U.S. home prices will likely moderate housing growth rates during second half of 2013, according to Fitch’s outlook, which also finds that “the large public builders are gaining share largely due to their land resources, liquidity and access to capital markets.”