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Volume 7 - Number 18

August 29, 2014

FHA Lending to Low FICO Borrowers Increases

FHA lenders have been lending more aggressively to borrowers with FICO scores below 679 than to more affluent borrowers, according to recent research by an independent housing and consulting firm. Using data from the Department of Housing and Urban Development and interviews with mortgage industry executives, researchers at John Burns Real Estate Consulting found that homebuyers with less-than-stellar credit are finding it easier to buy a home below the FHA loan limit. In contrast, the study also found that automated underwriting prevents many highly qualified borrowers from obtaining a home loan because their “income situation does not fit squarely in the credit box.” This segment includes affluent retirees, self-employed, or commissioned salespeople. “In the aftermath of the housing crisis, the reality is that we are lending aggressively to the poor and conservatively to the rich,” said Lisa Marquis Jackson, senior vice president at John Burns. The study’s findings challenge ...

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