In a new letter to the Federal Reserve, the National Association of Realtors (NAR) said that residential underwriting standards remain too tight and the central bank should use its influence to ensure that new mortgage regulations do not further inhibit access to credit.
In its letter to Fed chairman Ben Bernanke, NAR says it hopes the Fed’s decision to purchase more MBS will lower mortgage rates and stimulate demand in the housing sector.
However, the impact of QE3 will “likely be diminished” if the regulators issue mortgage regulations that “only serve to further tighten credit,” the NAR letter says.
A new NAR survey shows that 53% of purchase mortgage loans originated in August went to borrowers with credit scores above 740.
In the letter, NAR president Maurice Veissi also raises concerns about the Basel III capital proposal where the Fed is the lead regulator.
“As proposed, the rules severely disadvantage residential and commercial mortgages under most scenarios in terms of risk weighting,” Veissi said. “The Fed should work to ensure that these rules take reasonable steps to reduce risk without inhibiting access to mortgage credit.”