Fannie Mae has announced a major overhaul of its Desktop Underwriter engine, scrapping the minimum credit score requirement of 620 for loans submitted through its platform. This change comes into effect this weekend and mirrors a similar move by fellow mortgage middleman Freddie Mac several years ago.
The aim of this new policy is to make homes more affordable for Americans who have struggled to qualify for mortgages due to their poor credit scores. Studies have shown that credit histories are often the primary reason why property loans are denied, making this change potentially a game-changer for people trying to get on the property ladder.
Prior to this change, any borrower with a score below 619 would automatically be disqualified from receiving a mortgage. However, under the new policy, borrowers will still need to meet certain criteria, including having robust finances and low debt-to-income ratios. The lender's Desktop Underwriter engine will conduct a "comprehensive analysis of risk factors" to determine eligibility.
Economists are optimistic that this change could lead to a small positive demand shock at the entry-level of the American housing market. Jake Krimmel, Senior Economist with Realtor.com, notes that the change would likely benefit borrowers with credit scores just below the 620 threshold, who have strong finances but struggled to qualify for mortgages in the past.
However, there are concerns about the long-term impact of this policy change. Krimmel warns that widening the doors to homeownership could put upward pressure on prices, pushing some of the Americans who stand to benefit from the change out of reach. High mortgage rates and high home prices remain a significant barrier to entry for most potential homebuyers.
Mortgage rates are expected to remain around six percent for the foreseeable future, making affordability even more challenging for buyers. The median existing-home sales price reached $415,200 in September, up 2.1 percent from last year. While this change may expand the pool of eligible buyers slightly, experts believe it won't make a major impact on today's housing market.
Critics have raised concerns that loosening credit standards could bring back the kind of risky lending practices that contributed to the 2007-2008 housing market crash. However, economists point out that the mortgage system has undergone significant reforms since then and now has far more safeguards in place.
The aim of this new policy is to make homes more affordable for Americans who have struggled to qualify for mortgages due to their poor credit scores. Studies have shown that credit histories are often the primary reason why property loans are denied, making this change potentially a game-changer for people trying to get on the property ladder.
Prior to this change, any borrower with a score below 619 would automatically be disqualified from receiving a mortgage. However, under the new policy, borrowers will still need to meet certain criteria, including having robust finances and low debt-to-income ratios. The lender's Desktop Underwriter engine will conduct a "comprehensive analysis of risk factors" to determine eligibility.
Economists are optimistic that this change could lead to a small positive demand shock at the entry-level of the American housing market. Jake Krimmel, Senior Economist with Realtor.com, notes that the change would likely benefit borrowers with credit scores just below the 620 threshold, who have strong finances but struggled to qualify for mortgages in the past.
However, there are concerns about the long-term impact of this policy change. Krimmel warns that widening the doors to homeownership could put upward pressure on prices, pushing some of the Americans who stand to benefit from the change out of reach. High mortgage rates and high home prices remain a significant barrier to entry for most potential homebuyers.
Mortgage rates are expected to remain around six percent for the foreseeable future, making affordability even more challenging for buyers. The median existing-home sales price reached $415,200 in September, up 2.1 percent from last year. While this change may expand the pool of eligible buyers slightly, experts believe it won't make a major impact on today's housing market.
Critics have raised concerns that loosening credit standards could bring back the kind of risky lending practices that contributed to the 2007-2008 housing market crash. However, economists point out that the mortgage system has undergone significant reforms since then and now has far more safeguards in place.
! It's gonna be a game-changer for people with poor credit scores 
. No more being stuck on the sidelines, trying to get into the housing market. The idea of widening the doors to homeownership is exciting, but I'm also a bit worried about it 
. We've gotta make sure these new rules don't lead to another financial crisis 
. But hey, if it means more people can get on the property ladder, I say let's give it a chance 
! #MortgageReform #AffordableHomes #FinancialStability
news about Fannie Mae's new policy is like a big 
wave for people struggling to get on the property ladder! 
They'll no longer be stuck at 620 credit score or below, which is literally a 
barrier to homeownership for many.
sunshine to the American housing market. It's like, who cares about credit scores if you've got strong finances and a good income? 
And it'll be awesome to see more people able to get mortgages and start building their own homes.
Still, I'm all for giving people a chance to own their dreams! 
and maybe it'll help some people who thought they'd never be able to own a home 
but yeah, theres still a lot of risks involved 
, thats why its good that there are safeguards in place now. Mortgage rates being around 6% is crazy high, its like they're pricing us outta our own homes 
. I wish experts could find a way to balance making homeownership more accessible with not making it too easy for people to take on debt 
. It could totally help people who've been struggling to get on the property ladder.
I mean, mortgage rates are already pretty high and home prices are crazy 
.
. Ugh, my brain hurts from thinking about this stuff 