Helping my clients achieve their dream of homeowership is incredibly rewarding to me. For some hopefuls, however, turning their dream to reality has been impossible because of what some are calling out-dated credit scoring models used by government sponsored lending agencies. In fact, some lenders say that current credit scoring models are “needlessly excluding millions of creditworthy borrowers from the mortgage market.”¹
This is not about relaxing standards, but rather more accurately rating credit worthiness. Minority are more likely to have faithful credit histories based on utility or rent payments, than the kind of credit history that traditional credit scorers use (e.g., credit cards and consumer loans) to determine credit ranking.
According to Forbes, “If Fannie and Freddie used new models, lending to Latinos and African Americans could grow a third without looser credit standards.” Full article: http://onforb.es/1Pxspay.
A Rising Tide Lifts All Boats (and homeowners…so to speak)
It’s not just a few who would benefit from newer, improved scoring: “Improving access to mortgage credit would not only meaningfully help to narrow the large and growing differences in wealth attainment for people of color relative to non-Hispanic white households, it would also provide a much-needed boost to the U.S. economy,” states VantageScore, leaders in the credit score renovation.
Fannie and Freddie to Assess Models
VantageScore, further reports, “As part of its 2015 scorecard, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, has directed the government-sponsored enterprises (GSEs) to ‘Assess the feasibility of alternate credit score models and credit history in loan-decision models, including the operational and system implications.’ This is one of several scorecard items under the category of the GSE’s objective to, ‘Maintain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets.'” Full article: http://bit.ly/1CEMRfd.
Thinking of buying? Need to know your credit score? Get your FREE credit score rating with VantageScore from one of these providers: Click Here.
¹ VantageScore, http://www.vantagescore.com/news-story/144