That is a tough question to answer. I would bet that if you asked 10 different economists you'd receive 10 different answers. In my opinion the regulations on lenders is a bigger burden on the institutions themselves than to the homebuyer. Although credit requirements have tightened up it is not as hard to qualify for a mortgage as the media would have you believe. The biggest impact to the average homebuyer is a lack of lender portfolio products, these are loans that are held by the lending bank as an investment and not insured by Quasi-Government Agencies. These types of mortgage products where a primary driver of the mortgage collapse, as the lender makes their own rules as to who is qualified or not. Where some of these products were dangerous, think subprime, others are not like Jumbo or Alt-A. The government and the Fed have created an interesting conundrum for lenders which will have to be adjusted as QE policies are wound down. New guidelines require lenders to hold a higher percentage of capital reserves based on what they lend, since banks make money by lending money holding more in reserves presents them with opportunity cost. A bank's way around this reserve requirement is to package and sell the loan to Fannie, Freddie, FHA, VA, or USDA but not give up their servicing right. In this instance the loan is insured by the Quasi-Government agency reducing the lender's reserve requirement and their risk while they make their money through origination fees and/or servicing. Fannie, Freddie, and FHA prefer not to have the incredibly high market share than that they do now and would like private enterprises to offer competitive alternatives but new regulations have all but eliminated these portfolio options. The Fed Reserve has artificially kept mortgage rates at all-time lows to help encourage home buying and to pump more money into the economy. If you had a 6.25% rate and refied into a 3.5% rate you now have several hundred dollars more per month to spend on goods & services. While low rates sound great it does have a cost. Because banks have to keep a much higher level of reserves for portfolio products compared to insured products they lose significantly more money on these products via opportunity costs. Since these loans are also typically held in their portfolio, albeit often hedged by bonds, they risk even more lost revenue through loan default. Compound this with low interest rates and a situation is created for lenders where the risks outweighs the rewards. Itâ€™s the lack of these products missing within the market that has stymied recovery due to regulation. Buyers of property over $417k, or are self-employed, or heavy asset low income have few products available to them which does have an effect on the recovery. In addition new guidelines on appraisals have made it too easy for home values to decline while significantly harder for them to increase but that is a whole other topic.
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