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According to the New York Fed's most recent quarterly report, $1.03 trillion in new mortgage debt was originated in the fourth quarter, and 67% of it went to borrowers with credit scores over 760. Just 2% of the newly originated mortgage debt went to subprime borrowers, a sharp contrast to the 12% average seen between 2003 and 2007. The share of mortgage balances 90+ days delinquent remained at 0.5%, a historic low.
Fannie Mae and Freddie Mac widened their credit windows somewhat in 2021. Loans with credit scores between 620 and 699 represented 12.36% of mortgages securitized by the GSEs, up from 9.34% in 2020, according to an analysis by Inside Mortgage Finance. And loans with credit scores between 700 and 739 represented 19.14% of securitizations, up slightly from 18.25% in 2020. Still, it's fair to say that the GSEs are pretty risk averse.
FHA loans are an option for borrowers with lower credit scores and smaller down payments, but sellers often cast them aside, fees are high, and appraisals frequently lag, creating gaps would-be borrowers often can't make up.
None of this is exactly news. But given that the mortgage market is slowing on refis and margins are shrinking dramatically, putting pressure on originators, it makes me wonder: is your lender expanding the credit box to pick up would-be borrowers that may have been left behind? The mortgage credit availability index fell in January, but I have a feeling it's going to expand in the months ahead.
Share your thoughts on reaching the sub-750 credit score borrower by emailing me at jkleimann@housingwire.com.
James Kleimann
Managing Editor, HousingWire
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