In recent years, pundits have spoken of tight lending and the need to expand access to credit to the broadest group of credit worthy borrowers. A number of issues have been cited as reasons for tight credit including law suits from the Department of Justice, investors forcing lenders to re-purchase loans, weak demand for riskier loans by investors, and the high cost to service non-prime loans.
Lenders who responded to NAR’s 12th Survey of Mortgage Originators indicated that the general risk of default and weak investor demand their restrictions. 25 percent of respondents indicated they had no overlays on riskier borrowers. Surprisingly, only 8.3 percent of respondents cited servicing issues like the higher cost of servicing riskier loans.