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The Real Estate Show addresses one of the five key contributing barriers to a low home ownership rate, Mortgage Credit Availabilty. Two recent reports, one from the Mortgage Bankers Association, and another from the Urban Institute, show that mortgage credit availability is indications that it is actually more difficult to get a mortgage now than it was before the crisis. We all agree that credit standards still have not normalized following the great recession. We're seeing that borrowers with good, even excellent credit scores, are not getting approved at the rate they were back in 2013, which was before the period of excessively relaxed lending standards.

The problem may, in fact, be worse than what the report numbers reveal. The actual denial rate also exposes an important factor behind the numbers. Mortgage denial rates have decreased slightly in recent years only because lower credit applications are choosing not to even apply for mortgages.

Learn more about Real Estate Investing and learn HOW by listening to The Real Estate Show with Eric Willner , Live every weekday morning at 8 o'clock (EST) on Florida's Money Talk Radio station WSBR AM740. You can also hear us on the free apps: iHeart Radio and TuneIn. Rebroadcasts are available on Facebook.

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Researchers and policymakers have use the mortgage denial rate to measure mortgage credit availability for more than three decades. The Urban Institute, has come up with a new way of measuring the denial rate, and may be a more accurate way of depicting the true credit accessibility, by eliminating borrowers with perfect credit from the denial calculation. Those borrowers will never be denied credit, and make the climate seem better than it is.

After researching 2015 and 2014 mortgages, as disclosed by the mortgage disclosure act data, they found the following very interesting conclusions: First, the traditional way of measuring denial rates significantly underestimates denial rates. Second, gaps in the Nile rate between whites and minorities with less than perfect credit have narrowed since 2017 and remain narrow. Third it remains easier to qualify for a Federal housing administration (FHA) loan then a conventional government sponsored enterprise loan.

So in summary from the urban Institute report, lending to only borrowers with perfect credit prevents too many borrowers who can pay their mortgages, from sharing in the advantages of home ownership. On the other hand, lending to anyone regardless of credit risk creates and unacceptably high level of defaults. The idea put forth, is how to find the right balance.

The mortgage market was judged to have operated under reasonable standards in 2001. Using the standard from that year for comparison, the report showed that the increased reluctance to lend it to borrowers with less than perfect credit killed about 6.3 million mortgages between 2009 into thousand 15. That's too many families missing out on homeownership.

... For more details, listen to The Real Estate Show with Eric Willner , Live every weekday morning at 8 o'clock (EST) on Florida's Money Talk Radio station WSBR AM740.

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Posted by Eric A. Willner, RFC, LUTCF, CSA on June 19th, 2017 11:25 AM