Fannie Mae (FNMA)

[navycmdr]

FHA Lending to Low FICO Score Borrowers Increases

FHA originators have been lending more aggressively to borrowers with FICO scores below 679 than to more affluent borrowers, according to a recent research report.

Using data from the Department of Housing and Urban Development and interviews with mortgage industry executives, researchers at John Burns Real Estate Consulting found that homebuyers with less-than-stellar credit are finding it easier to buy a home these days.

In contrast, the study also found that automated underwriting prevents many highly qualified borrowers from obtaining a home loan because their “income situation does not fit squarely in the credit box.” This segment includes affluent retirees, self-employed, or commissioned salespeople.

“In the aftermath of the housing crisis, the reality is that we are lending aggressively to the poor and conservatively to the rich,” said Lisa Marquis Jackson, senior vice president at John Burns.

The study’s findings challenge certain beliefs about FHA lending, namely that high mortgage insurance premiums, lender overlays and low credit scores are denying many qualified borrowers access to the program. For more on the story, see the new edition of Inside FHA Lending, now available online.