Feds Debating Expanding Credit Scoring Options For Mortgages
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What’s the story?
If you’re looking to secure a mortgage, you may be affected by changes being debated to credit scoring requirements stipulated by the Federal Housing Finance Agency (FHFA), reports the Wall Street Journal.
Currently the FHFA requires all mortgages sold to federal lenders Fannie Mae and Freddie Mac use a FICO credit score to qualify. After the mortgage crisis in 2008 - 2009 the FHFA raised the minimum FICO score required to qualify in order to help prevent predatory lending to borrowers without the financial stability to pay.
Nonbank lenders, who account for nearly half the mortgages issued, are pushing for the use of another score, provided by VantageScore, which is owned by the three major credit scoring companies — Equifax, Experian and TransUnion. They argue VantageScore is less conservative, allowing for shorter credit histories either because the borrower is young or has a history of bankruptcy or foreclosure.
They say as many as 30 million consumers could receive credit scores, and 7.6 million could qualify for Fannie Mae or Freddie Mac mortgages, which would boost home sales and the economy.
But many bank lenders and others in the mortgage industry oppose the change, saying it will open the door again to subprime borrowers, leading to more foreclosures. They also argue the potential number of buyers that might be affected is much smaller than predicted.
Both sides agree the FHFA credit-score requirements need updating. Possibilities include allowing lenders to choose which score to check, or requiring them to check both. They also could stick with the FICO score, but lower the minimum eligible score again.
What do you think?
Do you support a loosening of credit scoring requirements so more consumers can enter the housing market, or do you think it opens the door to another mortgage crisis? If FHFA decides to allow the use of VantageScore will that affect your ability to secure a mortgage? Is this a potential recipe for disaster or a potential boon for lower income buyers and young people?
Tell us in the comments what you think, then use the Take Action button to tell your reps!
— Asha Sanaker
(Photo Credit: Pixabay / Creative Commons)
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