Mortgage Grapevine

AFR goes to 640

that was fun while it lasted.
by LanceB November 6, 2009 4:08 PM

Rep says 640 on standard products only! Portfolio is still 580!
by das4short November 6, 2009 4:14 PM

Are you surprised? It should be 640. There are a lot of people that simply should not be buying homes--period. But yet you have people trying to get borrower's FHA financing with sub 620 scores. When are people going to learn. The industry is this way for a reason--many reasons. Continuing to push subprime mortgages through the almost extinct FHA avenues that will still accept them (sub 640) is going to further deteriorate our industry. Next year at this time you may not have an industry to work for.
by REAL ANSWERS November 6, 2009 4:49 PM

MissLoans---go back to Macy's or selling houses part time-your choice-- it sounds more in line with your mentality level.


by REAL ANSWERS November 6, 2009 6:22 PM

I don't know how long you have been in the industry, Real Answers, but your comments make me think not long.

FHA did just fine long before 'credit scoring' was anything more than a glint in the bank account of Fair-Issac. One of the greater contributors to solid underwriting has been credit scores. What started out as 'an additional piece of documentation' for a trained, experiencced underwriter to take into account has become the primary underwriting consideration. And over time, the slavish worship at the alter of the credit score has resulted in a sprial where underwriters get dumber and loan decisions are de facto turned over to Fair Issac to underwrite by proxy.

There are credit worthy individuals with 590 scores and people with 640 who shouldn't be let mear a mortgage. 20 years ago we used underwriters to evaluate ALL the factors associating with risk evaluation. Now we hire underwriters based on how little we can pay them and ask them to read a credit score instead of performing a professional risk analysis.

And your right about sub prime. But what you fail to discern was that sub prime involved the compete abrogation of risk evaluation in favor of a cheap and easy system of simply rating borrowers by a number produced by Fair Issac. And as we have found out, it simply isn't the reliable indice that lenders wanted it to be.

In a system where I can change a borrowers credit score by simply having a few corrections made to credit reords (taking 45 to 60 days) or have a borrower pay 300 down on a credit card to cover the distance between 600 and 640 in credit scoring, you have to question its validity. Was a $300 payment the difference between a good risk and a bad risk? FICO says it was.

Don't tell me about credit scores. If you want to improve FHA loss ratios, start talking to me about serious, professional underwriting.
by Primerate November 6, 2009 8:00 PM

Don't tell me about credit scores. If you want to improve FHA loss ratios, start talking to me about serious, professional underwriting.
by Primerate November 6, 2009 8:00 PM


hear ! hear !!!!!

give that man a harumph!!!

by Donktard Borker November 6, 2009 10:01 PM

Agreed. It's simply amazing that the worthless DU & LP total scorecard approve results are still accepted anywhere in the industry based on a credit score that in many instances means basically nothing, and often coupled with multiple layers of risk. Yes, serious professional underwriting involves looking at the whole picture, not a score alone. When scores were 1st introduced, they were supposed to be only a tool, not a decision maker. I am astounded daily to see what the AUS engines accept based on simply a score with no depth of credit history, no or minimal investment in the property, no reserves, payment shock, high housing & DTI ratios, CLTV with govie 2nd over 100%, & ad nauseum all combined together into one lovely loan which anyone with a minimum of common sense could see is a foreclosure waiting to happen. I often find myself wondering what the borrower himself is thinking, as in "how can I possibly afford this?". Usually, I conclude there is no thought. Then I start wondering about straw buyer transactions . . .

The minimum score will soon be 660, for whatever that's worth. Nil. Human underwriters who are free from "AUS Pressure" (ha) to make decisions based on all merits of the borrower's profile & risk layers is what this industry needs, not credit scores. There've been many applicants I've seen with say a low score that I felt were much more credit worthy/likely to repay than others in the "accepted range", but my hands are tied due to minimum score requirements.
by tennuwgal November 6, 2009 10:30 PM

Donktard--you probably don't know what undrewriting means--or default risk etc. But keep fighting for those 550 borrowers to get financing--it makes a lot of sense.

Primerate--It is not how I long I have been doing this, it is more like what I see, what I know about underwriting & defaults, and who defaults most. What you and others do not realize are that when you manage to get that 580 FHA loan closed through whatever company still allows it--guess what--When that loan defaults after your "common sense underwrting" fails, the servicer is making that lender buyback that loan. This will put most correspondent lenders out of business if it happens 2 or three times with no remedy. When that happens, you have brokers crying and bithcing because they don't understand why they can't get their loan done. It is amazing the complaining on this website about 550 borrowers they can not get financed. People are really senseless---including you. You are making a point about a 590 borrower who is "credit worthy". Guess what----they are not credit worthy---otherwise they would be able to obtain financing. Of course common sense underwriting does not go well with servicers sitting on 6 billion in FHA loans with a 12% default ratio most coming from lower credit score borrowers. There is a reason why people have a 590 score. Collections, late payments, high credit card balances etc. Of course you can have credit reports corrected and advise a client to payoff/paydown credit cards as you and everyone else suggest in order to increase credit scores. The result of doing these things (paying off debt) makes a person more credit worthly. Do you know that? I highly doubt if your opinion on what sub 600 borrowers are credit worthy and which loans make sense will ever be heard from Fannie, Freddie or any investor/bank who get stuck servicing your "common sense" loans you speak of.

Wake up!


by REAL ANSWERS November 7, 2009 11:09 AM

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