Archive for the 'FICO' Category
FHA Credit Overlays May Be A Form Of Redlining
January 20th, 2011
Written by Greg Frost
HUD has commissioned the National Community Reinvestment Coalition to conduct research on the practice by large bank consolidators of imposing FICO score overlays that require minimum scores above the new HUD minimum of 580. HUD previously had no FICO score minimums.
The NCRC alleges that the practice by large banks such as Wells Fargo, Bank of America, and J. P. Morgan Chase of imposing FICO overlays up to 640 on borrowers obtaining credit through their Correspondent and Wholesale lending sources is a form of “Red Lining” and effectively discriminates against those entry level borrowers who don’t have the means to pay larger down payments.
David Berenbaum, NCRC Chairman, notes that this potential “Red Lining” is being arbitrarily imposed only on loans originated by Mortgage Brokers and Mortgage Bankers, as all of the banks mentioned will accept lower FICO scores from borrowers who apply directly through the bank’s real estate lending offices.
Lawyers for several the largest Banks are on record saying that they have been expecting law suits on this matter and that it will be hard to defend these Bank practices because FHA loans are 100% insured.
FHA Commissioner Dave Stevens has gone on record stating that HUD’s move to a 580 FICO score minimum would effectively “open up” the credit box that has been constricted due to mortgage industry consolidation. In fact that has not been the case, as large numbers of potential customers have been denied credit due to these Bank FICO overlays.
Greg Frost, Sr., President of Frost Mortgage Banking Group, Albuquerque, New Mexico, the mortgage industry’s 1st billion dollar Originator, says “ FHA has been in existence for over 70 years. For 60 of those years there were no FICO scores or Automated Underwriting Systems. The FHA insurance fund was not in jeopardy, nor did it need refinancing until after the industry started relying on this new technology driven method of assessing risk. I long for a return to the days of manually underwritten credit evaluations, done by FHA certified Underwriters, who utilize the FHA underwriting guidelines to assess risk, approve loans, and allow credit to be extended to a larger community of qualified borrowers.”
HUD has commissioned the National Community Reinvestment Coalition to conduct research on the practice by large bank consolidators of imposing FICO score overlays that require minimum scores above the new HUD minimum of 580. HUD previously had no FICO score minimums.
The NCRC alleges that the practice by large banks such as Wells Fargo, Bank of America, and J. P. Morgan Chase of imposing FICO overlays up to 640 on borrowers obtaining credit through their Correspondent and Wholesale lending sources is a form of “Red Lining” and effectively discriminates against those entry level borrowers who don’t have the means to pay larger down payments.
David Berenbaum, NCRC Chairman, notes that this potential “Red Lining” is being arbitrarily imposed only on loans originated by Mortgage Brokers and Mortgage Bankers, as all of the banks mentioned will accept lower FICO scores from borrowers who apply directly through the bank’s real estate lending offices.
Lawyers for several the largest Banks are on record saying that they have been expecting law suits on this matter and that it will be hard to defend these Bank practices because FHA loans are 100% insured.
FHA Commissioner Dave Stevens has gone on record stating that HUD’s move to a 580 FICO score minimum would effectively “open up” the credit box that has been constricted due to mortgage industry consolidation. In fact that has not been the case, as large numbers of potential customers have been denied credit due to these Bank FICO overlays.
Greg Frost, Sr., President of Frost Mortgage Banking Group, Albuquerque, New Mexico, the mortgage industry’s 1st billion dollar Originator, says “ FHA has been in existence for over 70 years. For 60 of those years there were no FICO scores or Automated Underwriting Systems. The FHA insurance fund was not in jeopardy, nor did it need refinancing until after the industry started relying on this new technology driven method of assessing risk. I long for a return to the days of manually underwritten credit evaluations, done by FHA certified Underwriters, who utilize the FHA underwriting guidelines to assess risk, approve loans, and allow credit to be extended to a larger community of qualified borrowers”.
HUD has commissioned the National Community Reinvestment Coalition to conduct research on the practice by large bank consolidators of imposing FICO score overlays that require minimum scores above the new HUD minimum of 580. HUD previously had no FICO score minimums.
The NCRC alleges that the practice by large banks such as Wells Fargo, Bank of America, and J. P. Morgan Chase of imposing FICO overlays up to 640 on borrowers obtaining credit through their Correspondent and Wholesale lending sources is a form of “Red Lining” and effectively discriminates against those entry level borrowers who don’t have the means to pay larger down payments.
David Berenbaum, NCRC Chairman, notes that this potential “Red Lining” is being arbitrarily imposed only on loans originated by Mortgage Brokers and Mortgage Bankers, as all of the banks mentioned will accept lower FICO scores from borrowers who apply directly through the bank’s real estate lending offices.
Lawyers for several the largest Banks are on record saying that they have been expecting law suits on this matter and that it will be hard to defend these Bank practices because FHA loans are 100% insured.
FHA Commissioner Dave Stevens has gone on record stating that HUD’s move to a 580 FICO score minimum would effectively “open up” the credit box that has been constricted due to mortgage industry consolidation. In fact that has not been the case, as large numbers of potential customers have been denied credit due to these Bank FICO overlays.
Greg Frost, Sr., President of Frost Mortgage Banking Group, Albuquerque, New Mexico, the mortgage industry’s 1st billion dollar Originator, says “ FHA has been in existence for over 70 years. For 60 of those years there were no FICO scores or Automated Underwriting Systems. The FHA insurance fund was not in jeopardy, nor did it need refinancing until after the industry started relying on this new technology driven method of assessing risk. I long for a return to the days of manually underwritten credit evaluations, done by FHA certified Underwriters, who utilize the FHA underwriting guidelines to assess risk, approve loans, and allow credit to be extended to a larger community of qualified borrowers”.
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Even FHA Loans Require Good Credit Score
October 12th, 2010
Written by Frost Mortgage
If you’re trying to qualify for a mortgage loan, you undoubtedly know how important it is to have a good credit score. Without one, you’ll struggle to get most conventional mortgage lenders to give you any mortgage financing.
Mortgage lenders and banks passed out too many loans to too many consumers with weak credit scores during the housing boom. Since the housing market began its crash in late 2006, a growing number of these bad loans have ended up in default. It’s led to an uncomfortably high number of housing foreclosures. Foreclosure information Web site RealtyTrac.com reported that the United States saw 2.8 million foreclosure notices in 2009, an all-time record.
Because of this, mortgage lenders have tightened their lending standards. Today, they want borrowers to have scores of at least 620. Those who have scores under 750 won’t manage to qualify for lowest interest rates.
If you have dings in your credit history, such as missed credit card payments, late auto loan payments, or even worse, a past bankruptcy, you’ll struggle to obtain a mortgage loan from a conventional bank or lender.
There is an option, though, that doesn’t involve you paying sky-high interest rates: loans backed the U.S. Department of Housing and Urban Development Department’s Federal Housing Administration, but even consumers taking out these loans will need good credit scores.
FHA-backed loans come with a huge advantage: You’ll only have to come up with a down payment of 3-and-a-half percent of a home’s final purchase price to qualify for them. Most traditional lenders require you to come up with down payments of 10 percent to 20 percent. That’s a big difference in the amount of money you’ll need to put down.
To qualify for this program, you’ll need a credit score of at least 580. If you don’t have this, you can still get an FHA-backed loan. However, you’ll have to put down 10 percent of the home’s final purchase price instead of 3-and-a-half percent.
Fortunately, building good credit isn’t a complicated matter. You’ll have to vow to make all your monthly payments on time and cut down on your credit card debt. If you can do these two things, you’ll gradually rebuild your credit.
Getting a good credit score, then, is something anyone can do. You’ll just have to display the financial maturity and patience to work toward getting good credit scores.
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Greg Frost Sr.: Training industry leaders, planning for the future
June 21st, 2010
Written by Greg Frost
Things are always cooking here at Frost Mortgage, and last week was no exception. I wanted to share a couple of experiences in particular that I’m excited about.
Last week, I was the guest speaker at the Casa Latino National Franchisee meeting held in Orlando, Florida. We shared current mortgage industry information and conducted my Productivity Sales Training based on the 6 Scientific Principals of Ethical Influence.
This week I am in the airport and on the way to meet with the Primary Residential Mortgage, Inc. executive team for a 2-day Master Mind conference in Salt Lake City on Monday and Tuesday. Strategizing for continued industry leadership is the meeting goal, which includes design work on a new 580 FICO score FHA product that will be originated and serviced by Primary. I believe that a manually underwritten, common sense FHA product, without the severe FICO score overlays that are currently being imposed by the big Banks, is essential to simulating mortgage production and home sales. During the first 65 of the 77 years FHA has been in existence there was no FICO score a and no automated underwriting. Loans were manually underwritten to the FHA credit manual, and still should be.
Coming weeks are no less packed. What’s on your agenda?
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