HUD Secretary Tells REALTORS FHA is Exploring Alternative Credit Scoring Models to Expand Mortgage Access

HUD Secretary Tells REALTORS FHA is Exploring Alternative Credit Scoring Models to Expand Mortgage Access

A diverse group of housing industry stakeholders participated in a credit access symposium recently to discuss how alternative credit scoring models could expand access to mortgage credit for responsible borrowers who may have thin credit histories or extenuating circumstances like medical debts.

“REALTORS support safe, responsible access to mortgage credit for borrowers who can show they are ready and able to own a home and keep up with monthly payments.  Unfortunately, overly restrictive lending, except to buyers with near-pristine credit scores, prevents many otherwise qualified buyers from entering the housing  market,” says NAR President Chris Polychron.

NAR first called on federal regulators and the credit and lending communities in 2011 to reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks.

“If lenders and the government-sponsored enterprises were to adopt alternative credit scoring methods, such as FICO 9 and VantageScore 3.0 , they could expand access to mortgage credit without dramatically increasing risk in the housing market,” says Polychron.

The newer credit scoring models put less emphasis on the impact of unpaid medical bills, and the effect of missed payments on debts that have subsequently been paid off is eliminated.  FICO 9 and VantageScore 3.0 incorporate public utility and rental housing payments, information that helps lenders to evaluate younger persons and minorities who might not have a history of credit use.  FICO estimates that its new model could improve scores by 25 to 100 basis points.

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HUD Secretary Tells REALTORS FHA is Exploring Alternative Credit Scoring Models to Expand Mortgage Access (RIS Media Article)

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