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| Mortgage lenders are losing their appetite for risky mortgages. And although Ohio tops the list of the riskiest states, it also showed the biggest improvement.
Lenders’ reviews of home loan applications have helped collateral risk shrink by 28 percent during the year ending this January, HomeSmartReports.com announced. “When a market is hot there’s always a rambunctious phase where sellers try to game the peak, buyers stretch to get in before it’s too late, and homeowners try to lock in equity gains with new home loans,” said Mike Ela, HomeSmartReports president, in the announcement. “That sets the stage for market turbulence and risk.” But, the “sense of urgency among potential buyers and those who want to refinance appears to have passed in most markets,” he added. The California-based company reportedly generates risk and trend information as an index and incorporates changes in default and flipping activity, sales trends, value changes, neighborhood and borrower characteristics. The bad news, however, is that there are pockets where risks are greater than the norm for the state where it is located or nationally. In Ohio, for example, which is the state with the highest risk collateral level with 5.13 — more than double the national measure of 2.06 — the area of Springfield has a level of 11, Ela told MortgageDaily.com. He added that the reason collateral risk measure “goes up or down has to do with statistics around property, such as high foreclosure rate and high appreciation,” noting that sometimes the presence of fraud rings artificially inflates the value of properties and cause losses for lenders. Ohio, Tennessee, Georgia and Colorado had the highest risk levels, while they were lowest in New Hampshire, Rhode Island, Hawaii and Massachusetts, HomeSmartReports said. Nonetheless, Ohio was among the states that saw the strongest declines in collateral risk levels, along with Nevada and Washington, D.C., while slight increases were seen in Nebraska, South Dakota, Vermont, Arizona and Idaho, according to the announcement. “Lenders have access to measures of this turbulence and risk, and adjust their scrutiny of the loan applications accordingly,” Ela said in the written statement. “Consumers need to know what the pros know.” For that reason, HomeSmartReports says it provides online access to sales trends and property value estimates, and is the first site to provide consumers with technical information that was previously only available to real estate industry professionals. |
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. e-mail: [email protected]
