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Some banks are getting back into mortgage lending

Near the end of September 2016, the Urban Institute revealed that improving bank conditions could also lead to changes in the housing market. Following the 2008 financial crisis, numerous banks stopped originating mortgage loans because of increased regulatory scrutiny and low profit margins. The Urban Institute's assessments suggest that this may be changing, which could prove advantageous for Delaware residents who are looking to purchase a home.

In the years before the recession, banks had to fight more heavily for customers, so they were forced to lower their lending rates to stay competitive. While these lenders expend more effort and spend more time underwriting mortgages than they did in prior eras, their overall profitability has spiked multiple times as consumers moved to refinance their loans.

Analysts cite numerous reasons that might explain why loaning money has grown increasingly lucrative for lenders. For instance, banks have the ability to limit their lending activities to consumers with good credit. Even though they generally charge the same interest rates as other lenders, their discretion means they have less risk to deal with. Although Freddie Mac and Fannie Mae traditionally transferred fees to lenders, fee amounts have increased by a factor of two since pre-crisis years, which increases lender yield.

As markets change and evolve, first-time home buyers may encounter deals that seem highly advantageous. It's important to remember that prospective lenders vary greatly. Banks and other financial institutions that want to capitalize on favorable market conditions may attempt to sell loan products more aggressively by painting them in a highly attractive light. Because these portrayals can gloss over the risks of borrowing money or long-term market trends, it could be advisable to have an attorney review proposed loan documentation.

Source: MarketWatch, "Don't look now, but banks are offering mortgages again," Andrea Riquier, Sept. 29, 2016

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