What do lower down payment requirements mean for lenders?

In the wake of the housing crisis, borrowers turned in droves to the Federal Housing Administration (FHA) for mortgages requiring low down payments. The alternative? Putting up to 20 percent down through other lenders.

That trend is now changing.

"For years, it's been FHA or nothing [for borrowers unable to afford a high down payment]" Guy Cecala, publisher of Inside Mortgage Finance, told USA Today. "This shift is a sign that mortgage origination is loosening up."

Multiple news sources are reporting that loans requiring 5 or 10 percent down for non-FHA lenders have increased considerably over the last few years. CNN reported that TD Bank's "Right Step" program, for example, only requires only a 5 percent down payment.

Another factor is the increased cost of FHA loans. While the down payment requirement is still low—3.5 percent—annual insurance premiums have doubled in the last two years, according to USA Today.

Simple economics are pushing borrowers away from the FHA.

"FHA dominated the market for low down payment loans during the housing bust," CNN notes. "Taking on all those risky loans, however, depleted the agency's reserves and has forced it to increase costs."

Banks think that with the costs of homes rising, they are more insulated from the risk that is inherent with extending credit to borrowers.

And despite Lewis Ranieri's belief that lenders have engaged in an "irrational restriction" of credit in the aftermath of the housing crisis, the reality seems to be that his fears are, for the time being, unfounded.

Lenders will continue to use loan management software as they conduct risk assessments of borrowers.

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