FNMA nad FHLMC tightening underwriting guidelines, making it more expensive to get a mortgage
Mortgage industry changes throw new hurdles in borrowers’ way
Fannie Mae and Freddie Mac are tacking on extra fees for many loan applicants, while some lenders are going even further in tightening underwriting rules.
By Kenneth R. Harney
8:59 PM PDT, April 18, 2009Reporting from Washington—Mortgage rates and house prices are down—which sounds great for buyers and refinancers. But mortgage industry underwriting and appraisal changes taking effect this month are putting new hurdles in the way of borrowers and loan officers.
Take Fannie Mae’s and Freddie Mac’s add-on fees for loans purchased after April 1. In some cases, applicants are being hit with extra fees of 3% to 5% because of the type of property they want to buy or refinance, their credit scores or the size of their down payment.
Some major lenders who sell loans to Fannie and Freddie are going further—tightening underwriting rules beyond what either corporation requires. For example, as of April 6, Wells Fargo, one of the country’s largest mortgage originators, imposed a new minimum FICO credit score of 720—up from the previous 620—on all conventional loans purchased through its wholesale system that have less than a 20% down payment. It also began requiring a total debt-to-income ratio maximum of 41%—down from the previous 45%.
Fannie Mae now has a mandatory fee of three-quarters of a percentage point on all condominium loans, no matter how high the applicant’s credit score. For a once-popular interest-only condo loan with a 20% down payment and a borrower credit score of 690, Fannie imposes the following ratcheted sequence of add-ons: one-quarter of a percentage point as an “adverse market” fee; 1.5% for the below-optimal credit score; three-quarters of a percentage point for the interest-only payment feature; and the same because the property is a condo. The total comes to 3.25% extra, which can be paid upfront or rolled into the loan.
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They’re determined to destroy America.
If I hadn’t learned how to use common sense underwriting in the 80s and if I didn’t KNOW how well it works, it wouldn’t be so upsetting. EVERY underwriter knew how to make sure that good people got good loans—until FICO scores came along in the mid 90s.
The criminals at Fair Isaac can be proud to have paved the way for the destruction of America. They’re not the only ones at fault, need to credit the author of this article too. Kenneth Harney has known for many years that FICO scores don’t predict defaults and he did NOTHING to stop them. Note that any criticism of FICO scores is conspicuously ABSENT from the article.
A notable exception is the 2/08 Business Week article linked at:
Lenders agree: FICO scores do NOT predict defaults
I truly appreciate Dean Foust’s and Aaron Pressman’s work.
The million dollar question: WHAT HAPPENED?
Why are lenders STILL using FICO scores?
Aren’t things bad enough yet?
Are we all supposed live like the poor in Mumbai?
Instead of FINALLY taking action to get back to COMMON SENSE underwriting and to reverse the American course to HELL, the banks, Fannie and Freddie do everything they can to destroy what’s left of America.
Earlier today I posted at Trado:
Are houses at priced 50% of the market high bargains? Adrian Salbuchi’s take on the dollar
All bets are off. NOBODY knows what will happen. We are in uncharted waters.
I DO know that FICO scores don’t predict but CAUSE defaults and everybody with half a brain and willing to spend a few hours to learn about FICO scores will come to the same conclusion.
Tens of thousands have read my submissions to the FTC and FRB.
And not a single person with just a little bit of power or influence gives a damn.
I don’t get it. You don’t have to be a patriot or in any way care about others to want to DO something. Do they all think they’re the “elite” and so wealthy that they won’t suffer?
How could anyone NOT care about America turning into a slum?
Posted by Christine on 04/19/2009 at 08:09 PM
2003 Suit (appealed, Experian filed credit reports on PACER) • Fair Isaac - credit scoring fraudware • Credit - Collection - Economic News • (0) Comments • Permalink
