LOS ANGELES — Home prices are rising across the country, and mortgage rates — though still historically low — are up since the November presidential election.
Simply put, buying a home isn’t easy, especially in high-cost metropolitan areas.
But changes in the mortgage industry are afoot, with the goal of loosening some of the strict standards established after the subprime crisis — rules some blame for impeding sales.
“The reality has sunk in that there are buyers out there who will be able to buy homes and make the mortgage payments,” said William E. Brown, the president of the National Association of Realtors. The industry is “trying to give them more options to buy a house.”
Government-controlled mortgage giants Fannie Mae and Freddie Mac are paving the way by rolling out new programs to encourage homeownership.
The companies, with their congressional mandate to promote homeownership, don’t originate loans, but purchase mortgages from lenders to keep the market moving. And any changes they make in the underwriting standards for the loans they buy can have a big effect.
Also, lenders are moving to relax some standards partly because they fear losing business as home prices and mortgage rates rise, said Guy Cecala, publisher of Inside Mortgage Finance.
“If your business is going to drop 20 percent,” he said, “you need to come up with ways to offset that.”
The changes bring lending nowhere near the easy-money bonanza of last decade, which ended in financial crisis. But they have brought criticism from some corners that liberalizing rules for down payments and how much debt a borrower can have is a slippery slope that could eventually lead to another bubble.
“This is what happened last time,” said Edward Pinto, a fellow at the American Enterprise Institute, a conservative think tank.
During the bubble, borrowers often could put down nothing at all by financing the entire purchase.
After the crash, standards tightened considerably and federal regulators even floated a proposal to require 20 percent down for many mortgages.
For a low-downpayment option, borrowers usually had to turn to the Federal Housing Administration, which allows 3.5 percent down, but requires costly mortgage insurance for the life of the loan.
Now, borrowers increasingly have more options, though generally they need a good credit score.
The trend started in late 2014 when Fannie Mae and Freddie Mac announced new programs that allowed loans with as little as 3 percent down. But many large banks still reeling from the housing bust that cost them billions were skeptical.
Bank of America CEO Brian Moynihan said at the time his company was unlikely to participate.
But less than two years later, the bank started offering 3 percent down loans through a partnership with Freddie Mac. Wells Fargo, the nation’s largest mortgage lender, also jumped in last year, partnering with Fannie Mae. JPMorgan Chase now offers 3 percent down loans as well.
“We are seeing more and more lenders adopting it every day,” said Danny Gardner, Freddie Mac’s vice president of affordable lending and access to credit.
The 3 percent down loans through Fannie or Freddie are capped at $424,100 in most of the country.