As “refi” business declines, lenders get careless.

We know a mortgage broker who does a lot of “subprime” loans to borrowers whose credit is below par. Business was booming when interest rates were low, with a lot of refinancing, but as rates have started back up, fewer and fewer people are refinancing their mortgages. This is putting the squeeze on the lenders who want to keep writing mortgages.

My broker acquaintance says that the lenders he deals with have been loosening their requirements. As he puts it in an email: “The guidelines are a lot more creative and lenient than they were a couple of years ago. Guidelines changed once every 6 months. Now it is every couple of months — and always in the direction of less strict — because business is drying up, and they need more aggressive programs to keep the loans coming in.”

The odds are that there will be a lot of foreclosures in the next few years.

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