Mortgage Market Reopens to Risky Borrowers

Strict lending requirements are beginning to erode.
August 27, 2019

An echo? Or perhaps, “Here we go again.”

The strict lending requirements implemented in the aftermath of the worst financial crisis are beginning to erode, according to the Wall Street Journal. It’s been more than a decade since mortgages triggered the financial crisis, and now home buyers with low credit scores or high debt levels and those lacking traditional employment are more easily obtaining credit. These loans are no longer called “subprime” or “Alt-A,” having been rebranded as “non-qualified” or “non-QM” because they don’t comply with the Consumer Financial Protection Bureau’s standards for preventing borrowers from taking out loans they can’t afford.

According to Inside Mortgage Finance, the amount of unconventional loans taken out by borrowers in 2018 hit a decade high of $45 billion, and originations are on pace to increase this year as well. It reports that during the first quarter of 2019, about $2.5 billion worth of subprime loans were included in mortgage bonds, more than double a year earlier and the highest level since the end of 2007.

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