Falling mortgage rates cause concern for some

Falling mortgage rates and relaxed standards are gradually making it easier for people who wouldn't otherwise be able to own property to secure funding. While this is a cause for optimism for many, for those with clear memories of the housing bust of the last decade, it is also a cause for concern. 

One such pessimist is Edward Pinto, co-director of the American Enterprise Institute's International Center on Housing Risk, who worries that the nation could be wandering onto the same slippery slope that led to a crisis in 2008. His contention is that the ready availability of credit could lead to borrowing by people that will not be able to pay back the money over the long term, leading to default and foreclosure.

"The problem with that is the risk of default goes up as the down payment goes down and the FICO score goes down," Pinto told TribLive. "We've seen this movie before and how it plays out."

However, not all share his concern. Andrew Bon Salle, an executive vice president at Fannie Mac, believes that the loans are smart choices, and can be issued in a responsible manner. "We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers," he told the source.

For institutions that are worried about the increased risk of default, installment loan software serves as an invaluable tool. These programs can not only collate and manage a variety of different loan and repayment structures, they can also provide valuable insight that helps future decision-making. As such, lenders that use it have an added layer of protection from the hazards primarily associated with relaxed standards.