Stuck between a rock and a hard place, some mortgage lenders are choosing to relax underwriting requirements ever so slightly to offset a dramatic drop in loan origination volumes.

Most of the changes are to the "overlays" that mortgage bankers put on loans headed for sale into the secondary market. An overlay is a requirement that an originator adds above and beyond what the loan's purchaser demands; the buyer may accept certain loans with FICO scores as low as 600, for example, but the originator won't make them to borrowers with a score lower than 640.

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