Regulators have been encouraging mortgage lenders to relax credit, saying that will fuel the tepid housing market, while others say lowering FICO scores to include more low-income borrowers will lead to more defaults. “We simply don’t have enough qualified homebuyers even with mortgage rates getting as low as 3.25%,” says Logan Mohtashami, a senior loan officer at AMC Lending in Irvine, Calif. “We’re coming off a debt-asset bubble and deleveraging of mortgage debt is still going on. How much more risk do regulators want lenders to take?”

As MHProNews recently reported, the Federal Housing Administration (FHA) is aiming at borrowers with credit scores below 680 who have been passed over. Federal Housing Finance Agency (FHFA) director Mel Watt recently reduced the risk to lenders of having to purchase defective loans in an attempt to stimulate lending to low-income borrowers. Some analysts note the Dodd-Frank Act and other reforms eliminated the bad actors who pushed many borrowers into foreclosure, and lenders now being required to determine the borrower’s ability to repay should help pave the way for a normalized market. Mike Calhoun of the Center for Responsible Lending says loans to people during the crisis did well, and it was bad products that were the culprit causing the crisis, according to nationalmortgagenews.com.

Still, unemployment remains stubbornly high, falling some analysts say only because people quit looking for work; and the lack of wage growth will continue to stymy demand, regardless of historically low interest rates artificially maintained, that ultimately could result in a slow-growing economy, if not another recession. ##