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Mortgage Lenders Are Easing Lending Rules

Lenders are softening up in light of recent interest rate hikes. A recent survey by the government indicates mortgage lenders are easing the rules they use when approving home mortgage loans in response to the recent decline in mortgage applications. The Federal Reserve is warning that decreasing critera in approving mortgage loans cold result in an increase in bad loans. Many homeowners are currently paying less than the amount of interest due each month; this results in unpaid interest tacked on to the mortgage principal balance, a phenomenon referred to as negative amortization.

The decline in mortgage demand may be attributed to the decrease in the number of people refinancing their mortgages. Demand for financing new homes is at the lowest level since February.

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