NEW YORK – May 14, 2013 – Hopeful borrowers with credit scores below 620 increasingly are denied a mortgage as they struggle to meet lenders’ more stringent underwriting standards, according to Elizabeth Duke, a member of the Board of Governors for the Federal Reserve System, at a recent Housing Policy Executive Council.
From 2007 to 2012, mortgage originations for borrowers with a credit score between 620 and 680 fell nearly 90 percent, Duke said. During that time, mortgage originations fell only 30 percent for borrowers with credit scores higher than 780.
According to an April survey by the Federal Reserve, lenders are less likely to originate a mortgage for a borrower with a FICO score in the 620 range, even if the borrower has a 10 percent or 20 percent downpayment.
“The path to easier credit conditions is somewhat murky,” Duke says. “Some of the forces damping mortgage credit availability – such as capacity constraints and concerns about economic conditions or house prices – are likely to unwind through normal cyclical forces.”
In 2007, the median credit score was 730 compared to 770 in 2013, Duke said.
Source: “Lower credit scores disappear from housing market: Fed governor,” HousingWire (May 9, 2013)
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