Dougherty and others on the retail end of the mortgage industry said efforts by Congress and the Bush administration to boost the mortgage market through a temporary boost to loan limits at mortgage finance companies Fannie Mae and Freddie Mac, and other measures, had accomplished little so far.
"The industry is still going in the other direction" as it tries to figure out how to lend to people who will make their payments, said Dougherty, referring to the big players whose rules he has to follow.
Regina M. Lowrie, president and chief executive officer of Vision Mortgage Capital L.L.C. and former chairwoman of the Mortgage Bankers Association, said Wall Street, which flooded the housing market with money during the real estate boom, was forcing a retreat "to the basics of prudent underwriting."
"They've had to do that in order to try to improve liquidity in the secondary market and give investors confidence in mortgage-backed securities," Lowrie said.
At the same time, Lowrie is critical of Fannie Mae's tightening. "I'm of the opinion that this is not the time when they should be doing that," because it conflicts with the company's government mandate to make home mortgages more affordable.
Fannie Mae spokeswoman Amy Bonitatibus said, "Our recent underwriting changes will help prevent" borrowers from getting mortgages they cannot afford long term.
Some of the Fannie Mae changes could be described as a push to get borrowers to make bigger down payments.
Others demand better credit. For example, starting this month, there is a firm rule that anyone who was 60 days late with a mortgage payment in the previous 12 months is not eligible for a loan that would be sold to Fannie Mae.
