I just read an interesting article by Calculated Risk on the changes in the mortgage industry. Underwriting is a big difference between this downturn and the last.
There was a rush to finance everyone so risk management went out the window. Well, it turns out that FICO scores and computer models weren’t any good at managing risk.
But I don’t think that we’ll return to the days of manual underwriting (a very costly process) for the lenders. The lender will have to charge higher interest rates to make up for the losses and higher rates will dampen housing.
