As a result, an entire class of potential borrowers has been shut out of the housing recovery, mainly because their loans won’t qualify under standards set through Dodd-Frank. While these non-qualifying loans carry higher interest rates, they are often extended to borrowers with excellent credit who don’t meet new standards, perhaps because they are self-employed, making it difficult for lenders to verify their income.
“After the subprime mortgage crisis, hardly anyone would touch this stuff with a 10 foot pole,” Cecala said, referring to private-label residential mortgage bonds. Now “investor demand is pretty strong for these because they come with a higher yield.”
This article was provided by Bloomberg News.