Are standards getting higher for standard mortgage loans?

On page A2 of the May 15th Wall Street Journal, an article on mortgage standards starts with this: “While tightening lending standards for home buyers with weak credit records, US banks aren’t raising the bar for applicants for conventional mortgages.”

Later, on page D1, we see the following headline and subhead:

“Lenders Get Tougher. Qualifying for a mortgage becomes harder, even for applicants with good credit, as banks probe deeper into personal finances.”

This sounds like a contradiction, and it is, but not completely. The first article claims that standards (like FICO scores, income and property appraisals) have not changed, while the second is focused on how closely banks are checking the data.

For example, banks will be more careful about appraisals and income verifciation — no change in standards. On the other hand, many are also tightening up credit rating standards.

For example, different credit reporting agencies have different scores, and “Fair Isaac” produces an independent score (FICO). banks usually use the higher of the scores, but now they often use the lower of the two. That’s a tightening of standards.

Click here for more information on credit scores.

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