Lenders dropping criteria

A major lender recently announced reductions in minimum FICO scores to attain a loan through them.  While there are many lenders who already accept these types of FICO scores, the news is significant to me because it shows that lenders are dropping their criteria to sustain their loan activity and create more buyers in the market.  The general trend is for lenders to get riskier and allows for certain items that they did not allow a year ago.  For example, some lenders would not refinance previously modified loans.  Today most lenders only require 24 months of payments on the modification.  While lenders, in our opinion, were overly conservative after the mortgage crises, some of these recent moves do show signs that lenders are being overly generous in their offering of credit.  The harm could be that these buyers who could not previously buy enter the market and serve to sustain or increase housing prices.  Whether that’s a good or a bad thing will depend on your personal point of view.


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