Admin

New FHA FICO Score Guidelines Cause Concern w/ Business Practice

By
Real Estate Agent with RE/MAX Renaissance

The upcoming FHA change to a minimum of 660 FICO has me more concerned than ever with the REO requirement to have buyers be pre-qualified in order to submit an offer on a property.  I have never really agreed with the practice.  In today's market, with multiple offers and buyers have to potentially submit offers on several houses before they are successful, I am even more concerned with this commonly accepted business practice.  So I am taking action and encourage my fellow REALTORS to do the same.  Here is a copy of a letter I am sending the AZ Dept of Financial Institutions and copying to the AZ Dept of RE, as well as my local association.  Feel free to copy my letter and send one of your own to your state's banking department if you share my concerns. 

Arizona Department of Financial Institutions

2910 N. 44 St. Ste. 310

Phoenix, AZ  85018

To Whom It May Concern:

I am writing to express my concerns regarding a commonly accepted business practice in Arizona real estate transactions when the property for sale is a foreclosure.   Currently, many seller/banks require a pre-approval letter from their bank as part of the contract regardless of whether or not the prospective buyer is already pre-approved with another lender.  The intent is to ensure that the buyer is truly pre-approved before accepting the offer.  However, if pre-approval guidelines are standardized, there should be trust within the industry and this should not be necessary. 

My complaint stems from the reality of what I am seeing happen due to this requirement.  I am seeing the bank's loan officer make a "hard" attempt to convert the buyer to their loan program by offering incentives such as free appraisals, no application fee, etc.  My other concern is that in today's highly competitive market, buyers are having multiple inquiries placed upon their credit report only to have their contract rejected for the property.  With FHA getting ready to raise the minimum to a 660 FICO score, I feel the need to object to this business practice, as it can negatively affect a buyer's credit score.

I am writing to you to ask that you evaluate this business practice to determine if Arizona should prohibit forcing a buyer to be pre-approved as a condition to review their offer.  I might understand if it was a condition after acceptance, but I am not sure I even agree if that is acceptable.  No other seller can demand to review a buyer's credit report as part of the acceptance process.  I think it's time our industry took back control of the real estate process from the loss mitigators who work for the banks.  Thank you for considering my request for inquiry.