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Let’s take a look at some recent headlines in the mortgage industry news:
- Bipartisan Senate Bill would force Fannie & Freddie to think outside FICO
- FHFA’s Watt: No Change in GSE credit scoring model until 2019
- Freddie expects to double low down payment mortgage volume in ‘17
If you take the time to read these articles, you will find that each is talking about ways to get financing to more potential home buyers to increase homeownership. A noble cause for sure. But, would it really help?
Congress and FHFA are talking about expanding the credit box to take into account more than just a consumer’s credit score.
They are looking at alternative scoring models, like Vantage Score, while taking into account a consumer’s payment record on phone, utility bills, and other goods and services not regularly reported to the credit repositories.
Fannie has already reverted back to reviewing trending data for a consumer’s credit, looking at past payment history, plus method of making payments.
Both Fannie’s and Freddie’s current low down-payment programs allow alternative credit and income to be used in qualification for some low to moderate income home buyers.
A careful and measured approach to expanding the credit box is good for everyone. Or, is it?
I applaud Congress’ and FHFA’s efforts to get more people into homes. But, I wonder if they’re efforts will hurt those they want to help.
The capability to qualify more consumers for loans will result in more consumers buying homes. As we now have a shortage of homes on the market, this will drive up the price of the homes for sale. That will make it more difficult for those the new programs are intended to help to find homes they can afford.
So, although it’s great that people are thinking outside the box when it comes to financing homes, I think we also need to do something about finding housing consumers can afford.
