FHA Minimum Credit Score increased to 640???

Dud? Joined: 20 Nov 2009 Posts: 6

I have been in the mortgage business since 1984. Credit scores did not exist until the early 90's. Borrowers qualified based on how they managed their credit in the past 12-24 months and ratios. 29/41 with minimal flexibility. We also had to do a worksheet similar to VA, based on net income and not gross. Homeowners also had a different attitude than now, always make your mortgage payment first, then other credit. And they did. If investors/FHA went back to the way it used to be, homeowners made their mortgage payment first and quit spending money on their wants instead of needs we could get a lot more potential buyers into homes. Just my opinion.

Cherry Bomb Joined: 22 Nov 2008 Posts: 126 Location: TEXAS

maehound wrote:

I have been in the mortgage business since 1984. Credit scores did not exist until the early 90's. Borrowers qualified based on how they managed their credit in the past 12-24 months and ratios. 29/41 with minimal flexibility. We also had to do a worksheet similar to VA, based on net income and not gross. Homeowners also had a different attitude than now, always make your mortgage payment first, then other credit. And they did. If investors/FHA went back to the way it used to be, homeowners made their mortgage payment first and quit spending money on their wants instead of needs we could get a lot more potential buyers into homes. Just my opinion.

agree with you 100%,,

but for now Common Sense has been thrown out the window,

I have never been a proponent of FICO based anything when buying a house,

Ratios, No Payment Shock, Reserves, Job History and LTV should be the underwriting criteria, not a freaking FICO score...

back in the mid 90's, Subprime a max 90% LTV Full Doc, Rent History as 75% of the approval, No payment shock and ratios... common sense...

Posted: Fri Nov 20, 2009 4:09 pm

I have been waiting for someone to bring this up. So if we are all automated driving what's the need for the DE underwriting? Fico score system will have to go a complete overhaul in the next few years. The scoring is based on how you handle debt. It needs to be based on how little debt you have. As more American's use cash instead of cards they will start to complain.

Posted: Fri Nov 20, 2009 4:33 pm

Bummer. Needing a 640 now, I'll never be approved for a subprime FHA loan. What a shame.

Signed,
Jason Werner
(Everything in foreclosure litigation, but no missed payments)

Posted: Fri Nov 20, 2009 5:47 pm

Emerald wrote:

I have been waiting for someone to bring this up. So if we are all automated driving what's the need for the DE underwriting? Fico score system will have to go a complete overhaul in the next few years. The scoring is based on how you handle debt. It needs to be based on how little debt you have. As more American's use cash instead of cards they will start to complain.

If you don't "belong" in the system, you can't buy shiet. This is a system of slavery. So save your cash and pay everything in cash, you don't need to play their game. This is how i look at it. If i can't pay it with my money, it is not my anyway. Laughing

Posted: Sat Nov 21, 2009 4:55 am

Anyone remember the good ole days when FHA would (potentially) accept "mattress money"? Folks didn't have faith in banks before/during/after the S&L fallout. Heck, some of them NEVER trusted banks with their money (and I wouldn't be surprised to hear quite a few still do - not to mention even more have joined them in that line of thinking.)

FICO? If I could blame all of this on any one thing, I'd hang it on the industry's reliance on automated assessments of credit worthiness and collateral value. Why are we still doing this? And please don't tell me Fair Isaacs has come out with the next new thing that adjusts for consumer behavior and short-term trends. Algorithms can't do that - I don't give a damn how many "factors" you figure in - GIGO is still the rule ("Garbage In, Garbage Out") the info is totally unreliable. It takes a human's COMMON SENSE, experience and knowledge to make a true determination.

Posted: Sat Nov 21, 2009 2:35 pm

Hi Robin:

Agree with you 100%! I would much rather give a loan to someone with no credit what so ever than someone with 35 credit cards and a 810 FICO score.

Mattress/Pillow Money (It's been a while since I heard someone even say the term) is coming back. I've had about 4 borrowers this year that I've had to explain how this money has to be "seasoned" in their bank. The problem is people still have the bank accounts they are just not putting the money in!

You sound like you've been in the business a while. Have a question for you. On one file I have borrower's are on disability him 19 years her 9 years. DE Underwriter wants proof disability will continue for 3 years. I have the last DR letters from their last check up 6 months ago both letters state that in his opinion borrower's disability may be permanently disabled. Dr. will not give more than that due to he says a new operation may come out and fix their problems? Any suggestions from anyone?

Cherry Bomb Joined: 17 Jul 2009 Posts: 100 Location: SoCal

Emerald wrote:

Hi Robin:

Agree with you 100%! I would much rather give a loan to someone with no credit what so ever than someone with 35 credit cards and a 810 FICO score.

Mattress/Pillow Money (It's been a while since I heard someone even say the term) is coming back. I've had about 4 borrowers this year that I've had to explain how this money has to be "seasoned" in their bank. The problem is people still have the bank accounts they are just not putting the money in!

You sound like you've been in the business a while. Have a question for you. On one file I have borrower's are on disability him 19 years her 9 years. DE Underwriter wants proof disability will continue for 3 years. I have the last DR letters from their last check up 6 months ago both letters state that in his opinion borrower's disability may be permanently disabled. Dr. will not give more than that due to he says a new operation may come out and fix their problems? Any suggestions from anyone?

Just had this happen to me. SS Disability income, even though it may be deemed permanent, must be renewed every 5 or 6 years. Therefore if you are in the first couple of years in that renewal, they can count the income, otherwise they won't. Maybe they can go get themselves renewed?

Cherry Bomb Joined: 14 May 2009 Posts: 173 Location: Mars

Em, go over the DE UW's head. He/she is being unreasonable. You have a LONG history of both b's being on disability and the DR's confirm that both will continue to be perm dis. These are the type of uw's that you want to get fired and go work at Wal Mart.

Good luck!

Robin, I agree. I can't believe how many "smart" people thought relying on computer ai was a great idea. Me being the whore that I am loved the system and milked it dry. If the industry ever gets back to au/ai and the HVCC is repealed, I will back in the biz ready to milk away!

Posted: Sat Nov 21, 2009 5:15 pm

The milking part sounds a bit harsh to me, but I guess if you were using the system to the best of it's ability then you were following the rules. Have to say as a sales rep I let many LO's know that the automated system would approve people with great fico's and reserves with only a 1.00 in income. Had a lot of those go through. Hope we never see those days come back.

I'd like to see the automated not be 80% of the approval. At the same time I enjoy the faster underwriting times the automated provides. It will be good when we find the middle ground here.