Realtor group blames slow recovery on tight credit

High lending standards are preventing a full economic recovery, according to new survey findings and an analysis of historic credit scores and loan performance by the National Association of Realtors.

The group estimates that the U.S. economy would reap significant benefits if mortgage lending conditions were to return to normal.

“Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” said Lawrence Yun, NAR’s chief economist. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.”

According to the Realtors Confidence Index based on more than 3,000 responses by NAR members, there is widespread concern over the tight credit conditions for residential mortgages. Respondents report that lenders are slow to approve applications, and that banks request information from borrowers that is considered to be excessive.

Some expressed the belief that lenders are focusing only on loans to individuals with the highest credit scores.

“There is an unnecessarily high level of risk aversion among mortgage lenders and regulators, although many are sitting on large volumes of cash which could go a long way toward speeding our economic recovery,” Yun said. “A loosening of the overly restrictive lending standards is very much in order.”