Ranieri: Housing Has Bottomed but Credit Issues Loom

Bloomberg News
Lewis Ranieri, a widely followed investor, shown here in 2011.

The U.S. housing market has bottomed but a lack of credit and pending regulation have kept both consumers and lenders from increasing activity in a meaningful way, Lewis Ranieri, a widely followed investor and pioneer of the mortgage-backed securities market, said at a conference Monday.

Mr. Ranieri, who runs a variety of mortgage businesses that cover loan servicing, distressed investments and new originations, said his firm is taking advantage of the current market conditions with loan purchases. Loan buyers run the risk that home prices continue to fall, harming returns should the assets be sold.

“Many, myself included, think we are at the bottom,” Mr. Ranieri said at a conference of the Mortgage Bankers Association in New York. From the perspective of his firms, “we can’t buy loans fast enough,” he said.

However, he added, the flow of credit for home purchase is very constrained. It’s difficult for people with credit scores below 740 to get a loan. “That’s about half the population,” he said.

Uncertainty of how regulators will define a new set of lending standards in coming months has stunted the recovery, Mr. Ranieri said. Lenders and investors need clarity on the rules that they will be asked to meet, he said.

New rules that will define a “qualified mortgage” are intended to protect consumers from the kind of risky loans that sparked the housing bust and ensuing financial crisis. Lending standards have tightened dramatically since the housing market turned south, and lobbying groups including the MBA are concerned that the rules developed by the Consumer Financial Protection Bureau could make lenders even more cautious.

“I truly believe the future of our industry is decided in the next eight months,” Mr. Ranieri said. There’s a regulatory movement–as well intended as it may be–not only trying to fix [the market], it’s trying to change it.”

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