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Although policymakers have been hinting on their desire to open the mortgage credit box allowing more borrowers, the CEO of Bank of America claims that the banking institutions aren’t likely to relax on their credit standards any time soon.
Bank of America CEO Brian Moynihan, who was one of the speakers during the investor conference held in New York, claim that their company, the institution usually listed among the top five mortgage lenders in the country, has a few incentive “to try to create more mortgage availability where the customers are susceptible to default.”
His statements are against the most common complaints today about the mortgage industry, which is their over-tight lending standards that have certainly lessen the amount of potential homebuyers in the market.
Such issue is usually shared by young first-time homebuyers who are facing not only the tightening mortgage criteria but also the difficulty to save on their down payment.
Even with such complaints, Moynihan claims that their bank doesn’t have any plans on offering low down payment options, and instead suggest that these potential homebuyers consider renting than purchasing their own home.
However, the government continues to promote homeownership with both Fannie Mae and Freddie Mac taking steps to encourage lenders to provide more options to borrowers. Last month, Director of the Federal Housing Finance Agency (FHFA) Met Watt revealed that the GSEs are currently working on guidelines for mortgages with loan-to-value ratios between 95 and 97 percent, thus allowing down payments as low as 3 percent. Aside from this, FHFA is working on their representation and warranty framework to lessen the concerns of lenders on buyback risk.
Though this might pacify some individuals who claim that the tight mortgage credit standards have been holding them back from homeownership, Moynihan believes his institution takes a longer view.
“I know that that doesn’t sound good for an instant housing recovery and faster housing markets, but it’s actually good, because in the long term it keeps housing more fundamentally based,” he said.