It’s Not Just the Temperature That’s Been Dropping

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With business getting a little harder to come by, and more Millennials entering the housing market, credit scores are on the decline.

A recent Ellie Mae Millennial Tracker Report revealed that borrower credit scores across all loan types declined in 2017.

The report revealed that borrower credit scores for loans made in 2017 were 723. This is slightly down from a 725 score a year ago.

More dramatic decreases were seen in government loan refi’s:

• FHA loans declined to 669 from 678
• VA loans went from 725 to 710.

The dip in credit scores is an indicator that lenders are easing credit standards in attempts to provide home financing to more homeowners and potential buyers.

This can be seen as a good move as long as it is done carefully with an eye on the inherent risks associated with riskier lending.

Here are some interesting (or not so interesting) facts on lending and millennials:

• Biggest increase in borrowers was to those with first names more popular among Millennials; Dylan, Chelsea, Austin, Alexandria, and Taylor
• The biggest decrease was among prior generations like GenXers and the pre-Baby Boomers. Names like Kristen, Stanley, Kurt, and Jaime.
• Men make up the majority of home buyers at about 68%
• The average time to close all loans increased to 44 days, but
• FHA loan closing time decreased from 46 days in October to 43 days.

So, based on a first name and other data, you may know the type of borrower and the generation of your applicants. This may help you to adjust your services and product delivery accordingly. Every little bit helps.

With the economy improving, we should see more Millennials and other first-time homebuyers, testing the housing market. Eased credit standards, coupled with low down payment loans, like FHA offerings (if you do FHA loans) will help to get these buyers approved for the loans they need.

It’s a matter of them finding affordable housing. Once they do, lenders need to be careful to continue to adequately analyze these buyers to ensure the credit quality and qualifications needed to afford and maintain the home purchased.

Now is not the time to ease credit standards just for the sake of originating a few more loans. We’ve come much too far to go back to the days of high risk, sub-prime type loans. Let’s not forget the lessons we learned.

Quality and compliance are equally as important as increased loan production.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.