Mortgage Rate News

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During the credit crunch, Freddie Mac and Fannie Mae, the two government sponsored entities responsible for making home mortgage loans more affordable, have been providing loans. Fannie Mae has been doing this by allowing people with credit scores of around 580 to qualify for home mortgage loans. However, Fannie Mae can not longer keep this up. Starting on November 1 for manually underwritten mortgages and December 12 for loans underwritten using Desktop Underwriter, the new requirements will be 620. DS News reports on exceptions to the new requirements, as well as why Fannie has decided to tighten credit requirements for home mortgage loans:

Exceptions to the new minimum credit score requirement are limited to mortgage loans that are manually underwritten with nontraditional credit and those originated in accordance with the GSE’s Refi Plus offerings, which are being used to help underwater borrowers refinance under the Obama administration’s Making Home Affordable program. …

Brian Faith, a spokesman for Fannie Mae, told American Banker, “Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period.”

Even with the tighter lending standards, though, Fannie Mae remains one of the most generous mortgage lenders. Many mortgage lenders are now requiring a minimum credit score of between 680 and 720 in order to qualify for mortgage loans, with some expecting a 740 if borrowers want the best home loan rates.

Mortgage standards have also been tightened across the board for mortgage lenders offering refinancing. Indeed, since refinancing is an exception to Fannie’s new tightened requirements, those wishing to refinance, especially under Making Home Affordable, might consider it. The deals are good, and you could save a quite a bit of money. If you are looking for a first home mortgage, though, you might find things more difficult to arrange.