Wall St Experts - Mortgage Lenders Push the Envelope

By James B. Kelleher and Jonathan Stempel, Reuters

Mortgage lenders are offering faddish loans like there is no tomorrow. Experts worry that yesterday’s lessons have been forgotten.

“There are more loans going out to more people,” says Kathleen Bochman, an analyst for bond research service GimmeCredit. “Someone is clearly dipping down.”

The worry is that banks, chasing market share and profit, are offering too many loans and easy credit to unqualified borrowers. Bad lending practices in the go-go 1990s helped send Conseco Inc. into bankruptcy in 2002 and nearly did in Providian Financial Corp.

Experts fear a reprise if an overheating U.S. real estate market, which may absorb some $3 trillion of mortgage loans this year, cools off. The National Association of Realtors this week said demand for existing homes fell in July, while supply rose to a 17-year high.

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