A Comeback for Risky Home Buyers

From The Wall Street Journal

ANALYSIS: CALL IT A COMEBACK FOR RISKY HOME BUYERS

More Americans who recently went through foreclosure or bankruptcy are getting home loans, the Wall Street Journal reported today. A new wave of nonbank lenders is bringing these risky buyers back into the housing market some seven years after the mortgage meltdown. The lenders are targeting borrowers who have recently gone through a foreclosure, short sale or bankruptcy — but who they say are safer than their credit profiles suggest. They are sometimes approving borrowers in as little as a few months or even weeks after a foreclosure.

“Lenders are trying to carve out niches that play upon the fact that underwriting remains, by historic standards, very tight,” said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. Several lenders have entered this market since the housing crisis, and their numbers, while still small, have picked up over the past year. Cecala estimates that mortgage originations for borrowers who have recently been through a major financial setback and are back on their feet will total at least $5 billion this year. That’s up from around $2 billion to $3 billion last year and expected to be the highest since the housing boom, he said. That compares to a total of $1.3 trillion of mortgage originations that are expected for 2015, according to the Mortgage Bankers Association.

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