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If home prices were still rising, defaults would be low, investment returns would be high, borrowers would still be cashing out equity, and lenders would be showering credit on home buyers.
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Owner-occupancy is associated with high borrower motivation to repay the loan.
WITH interest rates threatening to head considerably higher, borrowers may be tempted to lock in today's still relatively low figures with 30-year, fixed-rate mortgages.
Now that real estate prices have stopped rising, and mortgage payments are resetting higher, borrowers can no longer afford to make these payments.
While long-term rates on loans of the highest borrower quality are still modest by historical standards, the pace at which the debt has climbed, has made prospective American lenders draw in their horns.
Hence, formal lenders, namely banks and cooperatives, may ration credit, request additional documents from and frequent visits by the borrower (leading to higher borrower-side transaction costs), demand marketable collateral, and favor production credit over consumption loan.
These people are often poor and considered high-risk borrowers, too high-risk to interest traditional banks and lenders.
For high-end, high-credit borrowers, things have rarely been better.
Interest rates were high, but borrowers were numerous.
And while delinquencies remain high, fewer borrowers were falling behind on mortgages.
Loan repayment rates are very high, because borrowers are required to join "lending circles".
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com