Government efforts to make lenders pay for soured mortgages may be keeping potential borrowers from record-low interest rates, slowing home sales and refinancing as banks tighten standards to avoid more demands for refunds.
Lenders are insisting on higher credit scores and more documents than required by the Federal Housing Administrationand government-backed Fannie Mae and Freddie Mac. Quicken Loans Inc. and Vision Mortgage Capital are among firms saying they are increasing scrutiny of would-be borrowers in response to pressure to cover losses incurred on U.S.-backed housing debt.
“You’ve got to take measures now to protect yourself,”John B. Johnson, chief executive officer of Birmingham, Alabama-based MortgageAmerica Inc., said during a panel discussion this month. Demands that lenders repurchase bad mortgages from Fannie Mae and Freddie Mac are “casting a pall over the market. I fear that it will face a much longer recovery because of this.”
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