Fannie Mae: Mortgage lenders unnecessarily restrict credit

Somebody tell us why you can’t get a FICO score without a credit card… And you can’t get a loan without a FICO score? It would appear to us that less debt would be a better risk – yeah? Why couldn’t the lender use the utilities, cable, phone payments to rate the borrower? Why can’t the credit companies use no debt, no collection actions and current utilities to create a FICO score? They certainly leave bankruptcy, court judgments and tax liens on the record in their assessment.

It appears that without credit card debt, the borrower might not be as susceptible to default … Which is probably still their game plan.

Justice League

(Image courtesy of Fannie Mae)

It appears the post-recession mantra of mortgage lenders is “better safe than sorry.”

Despite pushes from the Federal Housing Finance Agencyand the Federal Housing Administration, many mortgage lenders are still applying additional credit overlays to loans delivered to Fannie Mae and Freddie Mac, a new survey of lenders showed.

The survey, conducted by Fannie Mae’s Economic & Strategic Research Group and based on responses from senior mortgage executives in May 2015, found that approximately 40% of lenders who deliver loans to the GSEs or Ginnie Mae reported applying credit overlays that are more stringent than what the GSEs or Ginnie Mae require.

Fannie Mae’s quarterly Mortgage Lender Sentiment Survey also found that 64% of lenders who deliver loans to the GSEs or Ginnie Mae said that credit overlays are applied on a “limited basis,” which is 20% or less of their loan…

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