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Fannie Mae says no to credit scores below 580

Fannie Mae is setting new rules about what mortgages it will buy, including a credit score threshold for the first time.

The District-based mortgage giant has told lenders it will no longer buy most loans made to borrowers with credit scores below 580, nor will it buy loans that have been more than 60 days past due within the last year.

http://dallas.bizjournals.com/washington/stories/2008/03/31/daily33.html

More and more FICO requirements.

Pay your bills on time and keep those credit card balances low, low, low.
Clients will need to be wary of their credit scores and those who do not use a lot of credit will be forced to keep some open credit going on at all times to maintain scores.

Stay tuned as the Mortgage World Turns!!!

http://www.dallasloanguy.com/docs/about_credit.pdf <= A little book about credit that I put together. Some of my writing and some data from other places like the Fair Credit Reporting Act.

Tom Burris
DallasLoanGuy.com
Dallas, TX

"A Home Loan for Every Texan"

http://www.dallasloanguy.com/

Texas Home Loans

I write about Texas Home Loans , live in the Dallas, TX area and lend across the entire Great State of Texas!! Subscribe to My Blog and stay informed about current lending changes!!

While I personally focus on Texas Home Loans and First Time Home Buyers.... I do lend in other areas. We are in about 46 States and adding programs to bring full service to an area near you.

Posted by Tom Burris | Texas Mortgage Dallas Mortgage FHA on 04/02/2008 03:00 PM

Comments (10)

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Originally posted at: Texas Home Loan Blog: Fannie Mae says no to credit scores below 580

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10 Comments on Fannie Mae says no to credit scores below 580

APR

2008

Tom - Credit Scores are becoming more and more important, even on the FHA side of things. I can hear Bob Dylan singing the song, "The Times They Are A Changing..."

Hey Jason:

It is like we all need to be credit experts now..... to help clients with marginal credit. Which is a double edged sword in itself.

I agree with you there Tom, and being a credit expert and actually getting results takes a heck of a lot of time and persistence...and a pretty hefty knowledge of the Fair Credit Reporting Act. If we can just squeeze a few more hours into the day, we might be onto something:-)

Tom, thanks for sharing this important point on the credit score. I have heard it about 3 times today.

APR

2008

In my book. those who make loans to risky borrowers charge more fees and/or higher interest rates to offset the risk. So, when a few loans go sour, they shouldn't cry "foul!" Just like in stocks. When you want higher returns, you buy riskier stocks. When a few head south, you can't cry foul. But cry foul they did, and now they expect a bailout from the US taxpayer while leaving the hapless homeowner on the hook. In my book, if you don't want the risk, then don't make the loan. People who don't pay their bills shouldn't be owning homes because they don't pay their bills. (Note: There are some people who ran into trouble through no fault of their own and they deserve another chance.) So, now you can expect a tighetning up on standards to qualify for a mortgage. And it's about time. Just my 2 cents worth.

APR

2008

Tom,

For the record, I'm a mortgage Broker/originator in Central Florida. I say it's about time FNMA/FHLMC get out of the subprime business with prime pricing. The default rate on scoes of 580 and less are staggering to say the least. bumping the rate 1/2 - 1% does not come close to covering the massive losses now and forthcoming. I think we should all ask ourselves... "Would you loan to someone with a 580 or lower score that may have had a 60 day late in the past 12 months?" The sad truth of it all is that they never should have been loaned to in the first place, at least not at the LTV and rates they were getting. This has nothing to do with 1st time buyers and/or minorities. It is simply about default rates. I don't hink any of us would want to lend to our children (at least happily) if they had the hostories we are losing. We'd probably do it, but we all know what the outcome would probably be..."bad debt".

The good news is that 1/2 the country has a score of 720 or higher, so the sun will rise tomorrow as they say.

APR

2008

Tom,

I just came by to subscribe to your blog. Thanks for the post!

Mike in Tucson

APR

2008

Tom:

Great advice! We are entering a time when all of us need to be more fiscally responsible.

APR

2008

Tom... why would anyone even take a consumer conventionally below a 620 score.... in all honesty, even with a 660 or below.... the rate and MI would be much higher than FHA, especially with 10% or less down.... overall, good in educating others...

APR

2008

Tom - Teaching responsible use of credit and how to keep credit scores high should be a mandated high school course. Thanks for reminding everyone - keep those credit scores up!

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