Riskier Applicants Becoming More Attractive

A new quarterly credit availability report from the Urban Institute’s Housing Finance Policy Center finds mortgage lenders are reaching out to borrowers who might have been marginal or not granted mortgages in the past.

The Washington Post reports the study suggests that Fannie Mae and Freddie Mac, the dominant players in the market, both have been taking on more risk “steadily since the financial crisis.” The Federal Housing Administration, Department of Veterans Affairs and the Agriculture Department’s rural home loans program have pushed risk to “the highest level since 2009.”

Portfolio and “private label” lenders — a category that ranges from giant banks to independent mortgage companies — have also been reaching deeper into the credit pool, but risk for them remains near record lows, the article says.

John Meussner, executive loan officer with Mason-McDuffie Mortgage Corp. in San Ramon, Calif., sees hints of trouble ahead. He said some lenders are dumbing down on FICO scores, as well, soliciting applications with scores in the mid-500s in combination with relatively skimpy down payments and “varying degrees of risk layering.”

#Credit #CreditRatings #FHA #FICO #PrivateProduct

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