Burdened by Old Mortgages, Banks Are Slow to Lend Now
A battle over who gets stuck with tens of billions worth of bad housing loans made during the boom years explains why many Americans still can’t get a mortgage as interest rates hit a new low.
The average rate on a 30-year fixed-rate mortgage hit 3.53% last week, the Mortgage Bankers Association said Wednesday. It was the lowest rate since at least the 1950s. But thousands of would-be homeowners are being locked out of the market because lenders, facing a hard-line stance from Fannie Mae FNMA -0.36% and Freddie Mac, FMCC -0.77% have grown wary of making new loans.
The two mortgage giants have been forcing banks to take back an increasing number of loans that the banks made during the boom years and sold to Fannie and Freddie. To protect themselves from such demands in the future, banks are ratcheting up credit and documentation standards for new mortgages.
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