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"However, should the borrower not be able to switch to a repayment loan, standard servicing practice is for the lender to require principal payments or for the loan to remain fully interest-only.
Tighter loan standards may also reduce defaults.
That led to lower loan standards to speed up the process of packaging the loans.
The looser loan standards would not increase the risk of default.
William Ryan, an analyst at Ventana Capital in New York who covers financial companies, said Green Tree cut loan standards beginning in 1995.
Freddie Mac's new loan standards will not dictate lending methods all by themselves, since Fannie Mae has not joined in.
Mr. Garner said that market appetites for anything that resembled a mortgage pushed loan standards down: "No income, no asset.
While Fannie and Freddie have tightened their loan standards, the F.H.A.'s underwriting requirements have remained liberal.
Loosening loan standards may seem like a replay of what caused the mortgage mess, including the costly failure of Fannie and Freddie.
During the bubble, banks and other lenders ignored loan standards and stuffed the mortgage pipeline with toxic loans and related securities.
Even though banks are not imposing restrictions on most loans, they are not ready to ease the tough loan standards put in place during the financial crisis.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com