Treasury's Maggiano defends push for looser credit standards
Laurie Maggiano, director of policy for the Treasury's Homeownership Preservation Office, told attendees at the REOMAC 2013 Summit & Expo that, while the housing crisis is in full recovery, consumers continue to lack confidence.
Maggiano shared with the crowd how difficult the lending rulemaking process is and how many complaints she hears on a daily basis. "This stuff is not easy," she noted.
Maggiano informed the crowd that the administration is acutely aware of the struggles many homeowners are still facing and guaranteed actions are being taken.
In fact, just last week there were three housing initiatives announced by the Administration in order to connect struggling homeowners with corrective programs that can assist them.
The first initiative is a partnership between the Treasury and NeighborWorks America to increase outreach and support for struggling homeowners seeking assistance via the Making Homes Affordable Program. Through this initiative, counselors will seek homeowners in need, helping them complete and submit application documents to their servicers, free-of-charge.
Secondly, the Department of Labor is encouraging American Job Centers throughout the country to inform unemployed homeowners about their foreclosure prevention options.
The final initiative is an effort from the U.S. Department of Housing and Urban Development to launch the Housing Counseling Office, which was established by Dodd-Frank. Through this initiative, 2,500 HUD-approved counselors will provide free or low-cost information about foreclosure prevention as well as advice regarding homeownership and renting.
Maggiano continued by addressing the recent request from President Obama to loosen lending standards last week, an action that has drawn much criticism after the Consumer Financial Protection Bureau recently announced regulations to tighten credit standards.
Between 2007 and 2012, new home purchases dropped 30% for those with a FICO score over 780, said Maggiano. In that same period of time, new home sales dropped 90% for borrowers with a FICO score between 620 and 680.
"Where are these folks supposed to live?" asked Maggiano.
First-time homebuyers and folks who have faced the misfortune of unemployment (no matter how short it may have been) likely no longer have the credit score necessary to get a mortgage. She noted that the current average FHA credit score is only 700.
We need to get back to a place where it’s no longer only those with perfect credit scores and 25% to 30% down getting a loan, Maggiano concluded.