FHA (the Federal Housing Administration) reports, “For the first time the average FICO score for insured cases reached the 700 level — actually 702.”
But, somebody thinks that’s not necessarily such a great thing. The U.S. Department of Housing and Urban Development (HUD (FHA is part of HUD)) has just opened investigations resulting from complaints filed by the National Community Reinvestment Coalition (NCRC). NCRC states that its investigation “reveals that too many of the country’s largest financial institutions are refusing to lend under the FHA loan program to consumers with credit scores between 580 and 640, despite the fact that FHA policy establishes a 100% guarantee for refinance.”
However, lenders are judged by their default and claim rates, and their underwriting authority can be termintated if those rates are too high.
Also, see: Average credit score chart, FHA loans.
The NATIONAL ASSOCIATION OF REALTORS actually has a written credit policy; it is named “NAR Credit Policy.”
The sub-title is, “LENDERS, FHA, THE GSEs, AND FEDERAL REGULATORS SHOULD REASSESS AND AMEND THEIR CREDIT POLICIES SO MORE QUALIFIED BORROWERS ARE APPROVED FOR MORTGAGES”
The policy states: “NAR questions the assumption that borrowers who agree to a loan modification or a payment plan for credit obligations they can no longer afford but who then demonstrate their ability to handle the modified payments are higher credit risks. NAR urges FICO to study the credit risk performance of these consumers and modify the FICO formula accordingly.”
H. R. 600, the FHA Seller-Financed Downpayment Reform Act of 2009, introduced by “Mr. AL GREEN of Texas (for himself, Ms. WATERS, and Mr. GARY G. MILLER of California)” uses the term “FICO score” 5 times. It is a bill “To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act.”
In March, 2010, Representative Green said, “Thank you very much, and thank for that new term for my vocabulary: Fake-O.” (2:13:58 in the video)
A press release (HUD No.10-016) from the U.S. Housing and Urban Development Department (HUD) Federal Housing Administration (FHA) dated January 20, 2010 is titled, “FHA Announces Policy Changes to Address Risk and Strengthen Finances.”
The release states: “New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.”