Another Sign Lenders are Tightening Standards

05/06/2008 – 1:32 am

Government sponsored provider of home loans, Fannie Mae, has just tightened the standards for home mortgages it guarantees or buys. 


Fannie Mae has informed lenders that it will require a minimum credit score of 580 for most loans it buys on an individual basis.  Previously Fannie Mae had no minimum score.


Credit scores or more commonly known as FICO scores provide the best guide to future risk based solely on credit report data. The higher the credit score, the lower the risk.  Credit scores range anywhere from 300 to 850.


Reestablishing credit after a foreclosure has also been changed.  Previously someone who has gone through a foreclosure had to wait four years before they could get a Fannie Mae mortgage.  That is now up to five years.


In other news, Fannie Mae informed loan services that it could exend forbearance periods on delinquent loans as long as six months so that the borrowers could find an alternative to foreclosure.


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