Bank loosen Credit Standards ??

Krista Franks Brock from DSNEWS brings us an article that
will brighten the day for real estate professionals. She reports that banks are loosening their
credit standards which will open up money for people to purchase homes. My only question is, “How loose?” Will these standards come back to haunt us
the way the lenders lending practices from yesteryear have hurt us? What do you think?

News Article

Housing Crisis to End in 2012 as BanksLoosen Credit Standards

Capital Economics expects the housing crisis to end this year,according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required toattain a mortgage loan is 700. While this is higher than scores required priorto the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found creditrequirements in the fourth quarter were consistent with the past threequarters.

However, other market indicators point not just to astabilization of mortgage lending standards, but also a loosening of creditavailability.

Banks are now lending amounts up to 3.5 times borrowerearnings. This is up from a low during the crisis of 3.2 times borrowerearnings.

Banks are also loosening loan-to-value ratios (LTV), whichCapital Economics denotes “the clearest sign yet of an improvement in mortgagecredit conditions.”

In contrast to a low of 74 percent reached in mid-2010,banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, somepotential homebuyers are still struggling with credit requirements. In fact,Capital Economics points out that in November 8 percent of contractcancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement incredit conditions won’t be significant enough to generate actual house pricegains,” and potential ramifications from the euro-zone pose a threat to futurecredit availability.