Experts say this means the loans, when originated, were loans that lenders expected to be paid back without any problems. If a loan goes into default during the first three years, that is an indication that the lender should have looked at the file differently from an underwriting prospective, said Christine Nothnagle, senior vice president of Nothnagle Home Securities. And if you look at these loans, you would have still probably underwritten them. In 87 percent of the default cases studied by the Housing Council, unpredictable circumstances contributed to the foreclosure. Another factor is the influx of first-time home buyers, who are flocking to the market because of falling home prices and new loan programs .
Lenders help first-time borrowers with offers of low down payments and closing costs.
The Department of Housing and Urban Development offers loans with easy terms for those who qualify . Competition in the mortgage market for customers produces good deals for borrowers, Dunkin said. In some cases, it may mean that they do not underwrite the loan quite as strictly as they did because they want to get the business in the door, he said. By definition, those who are qualified under the City programs could not otherwise qualify for home mortgages. Therefore, the City programs are not taking buyers away from traditional programs.