A recent story in HousingWire detailing Kroll Bond Ratings Agency’s examination of loans through the fourth quarter quoted Urban Institute’s Laurie Goodman, who argues that credit remains too tight for many borrowers.
Her thesis is that tight standards are what holds back mortgage loan growth.
Indeed, just earlier Thursday, FICO (FICO), LexisNexis Risk Solutions and Equifax (EFX) released the official details to the new pilot program that was first reported on Wednesday, potentially opening the door to help millions of borrowers secure financing for a home.
The three firms are working together to create a pilot program that will allow 12 of the largest credit card issuers in the U.S. to use alternative data to identify creditworthy individuals who would otherwise be unlikely to obtain traditional credit.
After the pilot program is complete in the coming months, FICO expects to make the score based on alternative credit data available to more lenders later this year.
Several real estate trade groups spent a day this week discussing the challenges that credit standards pose for access for some would-be borrowers and alternatives to traditional credit scoring.
A keynote speaker, Secretary of Housing and Urban Development Julian Castro, told the National Association of Realtors, the Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals he wants to widen the circle of opportunity for responsible families by making homeownership more affordable and accessible.
Laurie Goodman of Urban Institute notes that “the FICO scores required by lenders in making [1-4 family] loans have increased significantly—thereby decreasing the number of loans made to potential buyers with credit scores under 720.”
This is a flat out lie and she has been dead wrong on this topic for years! She always gets away of spreading such false lending concepts!
That flowed into a series of tweets to Goodman, after she posted this:
What followed got epic.
@MortgageLaurie I remember 2001 very well, lending standards were very liberal then like they are now with low fico, low down P. options— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie You're taking raw data points, not taking into account the economic cycle, demographics, wages, job structure and others— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie You're trying to make an apple to apple comparison when it's really a apple to brick comparison— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie We have always had a liberal lending standard here in the U.S. in a very subsidized housing market— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie Some upper end programs need higher fico score but they do more wealthy buyers, FHA & VA very low fico min, GSE now at 620— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie Lower fico Americans 1. Have high revoling debt balances 2. Don't have much in liquid assets reserves to pay down debt— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie For 15 years when I have seen lower Fico borrowers apply, they are lacking in liquid assets have high debt to income ratio— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie Even now, 3.5% down, closing cost with taxes impounded, (biggest cost in any loan) is difficult that is a core problem— Logan Mohtashami (@LoganMohtashami) April 2, 2015
@MortgageLaurie Creating a 520-600 Fico market place because right now it's 620 and above is just begging to add more questionable demand in— Logan Mohtashami (@LoganMohtashami) April 2, 2015