If anyone wants to see easier credit, it would be a homebuilder that runs a mortgage banking shop.

But Larry Nicholson, president and chief executive of Ryland Group in Westlake Village, Calif., is pessimistic on this front. Ryland's mortgage unit made 4,000 loans last year with an average credit score of 736. Nicholson would like to see that figure drop to 690 this year, but says secondary market constraints and put-back risk make that unlikely to happen.

"Some people have started to see things loosen up a little but I haven't seen a lot of it," the CEO told investors and analysts during a recent conference call. "I have always believed a lot of people who would love to own a house are just precluded because they have a ding on their credit. And I think it is wrong."

Lenders like Nicholson will struggle this year as the desire to ease standards is tempered by regulatory constraints and other headwinds. Ultimately, it might take stronger economic growth to break the ice. Rising personal income and a stronger jobs market could pave the way to easier credit late in the year.

"I think banks will be reluctant to go down the credit score scale," says Bank of the West chief economist Scott Anderson.

For one thing, lenders are adjusting to the Consumer Financial Protection Bureau's qualified mortgage rule, which is "pretty daunting," he says. "Until they see how that plays out, people aren't going to take too much risk in that space."

Single-family originations fell 27% the fourth quarter to $293 billion and lenders could see another 23% drop in the first quarter, according to Mortgage Bankers Association economists.

When loan production is falling, lenders generally compete on price or by easing their credit standards, according to Jay Brinkmann, former chief economist at the MBA.

"In this environment, it is going to be hard to go too far on the credit side," he says. "There will be some easing on the margins. But I don't think we will see it to the same degree as in past cycles."

Meanwhile, lenders are strapped with higher fixed costs due to the more stringent underwriting and documentation requirements of the QM rule, which make it harder to compete on price. They can't be sure they will generate enough volume to cover their costs if they lower their price.

"The ones that are going to make it are the ones that figure out that equation and how best to automate, cut costs and tighten up on their secondary market execution," Brinkmann says.

The Federal Reserve Board's latest survey of senior loan officers found a modest fraction of large banks eased their mortgage standards while a similar fraction of small banks tightened their standards.

This dichotomy may in part reflect the large settlements that Wells Fargo, Bank of America and other large banks made with Fannie Mae and Freddie Mac in 2013 to resolve loan repurchase demands.

Wells Fargo Home Mortgage is expanding its mortgage credit box now that it has substantially reduced its repurchase risk, according to Wells Fargo executive vice president Franklin Codel.

"Putting those issues behind us has allowed us to get much more comfortable and we are starting to open up our credit box more," Codel said at a National Association of Hispanic Real Estate Professionals Conference in Washington.

Put-back risk and indemnifications with the government-sponsored enterprises and Federal Housing Administration were "real issues for us," Wells Fargo's head of mortgage production said.

It led to tighter credit conditions. But now the pendulum is swinging the other way. "We will see more evidence of that in 2014," Codel said.

Maybe the Wells Fargos and Bank of Americas will lead the way. But a lot of banks will still be in a wait-and-see mode.

Banks would be more aggressive if they saw stronger economic growth, says Anderson at Bank of the West.

Unfortunately, "we saw some weakening of income growth and disposable income in the fourth quarter," the economist says. And the December jobs report was disappointing.

But he expects stronger economic performance in the second half of this year. By the end of the year, he says, bank will be more receptive to lending and taking on credit risk if they see rising incomes and better job creation.

"We are taking calculated risks where we think the economy is stronger," Anderson says. That applies to markets where home prices are rising and the supply of homes for sale is limited.

Right now, "banks are competing in price with their high-quality borrowers," he says. "They might loosen their credit score requirements if they see a stronger economy in the second half."

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