Credit Score Requirements Stifling Borrowers

Despite record-low interest rates, an increasing number of Americans can’t afford to buy a house.

The nation’s two largest mortgage lenders, Wells Fargo & Co. and Bank of America Corp., have raised the minimum required credit score on FHA-insured loans to 640 from 620.

Requiring a 640 credit score excludes about 15 percent of FHA borrowers, FHA commissioner David Stevens said.

Such a high limit will further delay a recovery in the real estate market, says Ron Phipps, president of the National Association of REALTORS®.

Source: Bloomberg, Jody Shenn and John Gittelsohn (11/17/2010)

[Editor's note. This issue arose at the annual conference of the NATIONAL ASSOCIATION OF REALTORS® last week. FHA Commissioner David Stevens challenged banks to return to underwriting basics rather than continue to rely on automated models that kick out applicants based solely on numerical scores. Read the write-up on Stevens' remarks.]