The Commonwealth’s lending system is in disarray.

Some of the developments are good, some are questionable.

I haven’t been paying much attention to all the minutiae regarding new regulations proposed by Attorney General Martha Coakley (and passed into law, I guess). Should I?

What I am a bit concerned about is making sure that the typical homebuyer (you know, some people are still buying homes … like, up to 75% of the people who were buying in 2006 and in 2005) still has access to credit, should they be worthy.

According to Banker & Tradesman:

Countrywide, First Franklin, Provident Funding, Amtrust Bank, Aurora Loan Services, Crescent Mortgage, Freedom Mortgage, Guaranteed Rate, Homecoming Financial, Vertice, M&T Bank’s mortgage division and Taylor, Bean & Whittaker are among other the lenders that have decided to eliminate no-documentation and no-ratio loans (those in which income is not considered as a factor in making the loan), limit yield spread premiums brokers can accept to 1 percent or 1.5 percent for most loans, or eliminate YSPs entirely, among other product and compensation changes announced since late December.

Many lenders now also are requiring adjustable-rate loans to be underwritten at the higher interest rate, in accordance with the regulations’ provision that lenders and brokers must “reasonably believe” that “the borrower will be able to repay the loan.”

That all sounds well and good, right? I mean, who should be able to take out a loan without proving the ability to repay?

However, so many lenders have gone out of business or pulled out of the state, completely, including big players such as Washington Mutual, that I fear those of us with good credit and ability to repay will find our options limited, if and when we look to borrow or to refinance.

Many lenders are saying they won’t offer some loan programs, rather than deal with regulations they consider extreme, unwieldy, and unworkable.

Source: Lenders Part Ways, Change Rules With State’s Mortgage Brokers – By Amy Wyeth, Banker & Tradesman

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