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Redfin: Finding balance in mortgage credit standards

Not too tight or too loose

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Before the financial crisis, the average FICO score hovered near 708. During the crisis, in 2007, the average came in around 693. Now in 2014, the average FICO is much higher, posting an average of 744 for Fannie Mae and 742 from Freddie Mac. According to Nela Richardson, chief economist for Redfin, there is a balance to be found in this. Per Forbes

After Fannie Mae released earnings last week, one statistic caught my eye: the FICO score.  To me, this number captures all you need to know about where the housing market’s been and where it’s going.  A FICO score is an indication of a borrower’s creditworthiness. Scores range from 300 to 850, and a score above 640 has historically been considered prime credit, high enough to qualify for most mortgage programs at the lowest rates.

The trick will be not lowering the FICO score so much that standards erode again. For the housing market to thrive, it needs mortgage lending that Goldilocks would approve of: not too tight or too loose, but just right.

Source: Forbes
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