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What bankers really think

By Polyana da Costa · Bankrate.com
Tuesday, May 1, 2012
Posted: 7 am ET

Is it getting easier to get a mortgage? Are banks offering underwater borrowers a chance to refinance?

The Federal Reserve asked banks across the country to answer some of these questions in a quarterly survey. Here's a snapshot of what lenders said in the latest Senior Loan Officer Opinion survey. I translated some of the questions for you.

The survey is based on answers by senior loan officers in 58 domestic banks and 23 U.S. branches of foreign banks.

If a borrower has a FICO score of 620 and a down payment of 10 percent, how likely are you to give this borrower a conventional mortgage loan, compared to 2006?

Nearly 60 percent of lenders said much less likely. None of the lenders answered more likely.

What if the borrower has a 680 score with 10 percent down?

For this type of borrower, things haven’t changed much compared to 2006. At least that's what 48 percent of the respondents said. Still, half of the lenders said they are less likely or somewhat less likely to lend to this borrower these days. One loan officer answered more likely but I'll assume he/she marked the wrong box in the survey.

Let's give that borrower a 720 score. Would you lend to him/her now?

A vast majority of banks said they would be just as likely to lend to this borrower today as they were in 2006. But 12 of the 52 loan officers who answered this question weren’t as convinced. The odds of getting approved are far better for a borrower with 720 score and 20 percent down payment, other questions in the survey show.

Has your bank made it easier or harder for borrowers to get a mortgage in the past three months?

Of 54 banks, only two said they've eased credit standards for mortgage borrowers. The vast majority said the standards didn’t change this quarter. And three banks say they've tightened the screws on borrowers.

Why are you so strict on borrowers?

Among the reasons: Lenders fear Fannie and Freddie will sue them and force them to buy back those mortgages if they go bad. The lenders also cited higher costs and greater difficulty in obtaining mortgage insurance for these loans.

HARP 2.0

The survey asked the loan officers if their banks are participating in the revised Home Affordable Refinance Program, which allows borrowers to refinance even if they owe more than their homes are worth.

Nearly half said their banks have "very little participation in HARP." About 16 lenders, or 30 percent, said they are actively promoting HARP and "satisfying most demand." The rest say they'll do HARP but they are not promoting it to borrowers.

What does that mean for borrowers who want to refinance with HARP? You have a 50/50 chance of finding a lender willing to refinance your loan. Don't give up after the first try and don't wait for your lender to knock on your door, offering help.

Follow me on Twitter @Polyanad

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