I don’t think that we’ll ever get back the 20% down conventional loans. Easy credit is here to stay because lenders (the lightly regulated ones) and banks have a stake in easy credit. They generate tons of revenue from those easy loans. Revenue and profit are what drive the stock and executive bonuses.
The key is risk management. Lenders will have to charge everyone more so that they can continue to market easy qualify mortgages.
Think about the credit card business — anyone can get one regardless of default or bankruptcy. The easy to qualify issuers make more money than the risk averse ones. They make it up on the outrageous fees. In my opinion the same thing will happen in the mortgage business. They will begin charging for payoff statements, refunds from impound account, mail statements will cost $5/mo, etc…
