Experts believe that lenders will start to lower underwriting standards as increasing interest rates keep drying up refinances.

Mortgage rates and housing prices are expected to go up this spring, and many experts believe it will leave lenders with a tough decision on how they will adjust to the decay of refinances and overall lending volumes.

The key question follows thusly: should lenders relax their underwriting in order to approve more buyers? Some may also have extra time to work with those buyers that find themselves on the margins of approval.

Laurie Goodman is the co-director of the Housing Finance Policy Center at the Urban Institute in Washington, and she reported that, “Rate rises are often accompanied by a relaxation of credit standards. We would expect that will be the case this time as well.”

“We think relaxation credit is a good thing because credit is way too tight.” She said, as many believe that such an adjustment is way overdue.

There were new mortgage rules put into place by the Consumer Financial Protection Bureau in January of 2014. Because of these rules, it may be risky for lenders to relax their lending standards significantly–as they did in the early 21st century, which eventually led to the collapse of the real estate market and destroyed the global economy. Should lenders relax their standards, they have to ensure borrowers have the ability to repay that loan and protect them from liability in the case of “qualified mortgages.”

The qualified mortgage rule has really boxed in lenders and has not allowed them to expand the credit box. As volume drops with higher rates, experts expect a modern loosening.

Contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. for all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California.