Is HUD Secretary Shaun Donovan telling consumers with low FICO scores to take a hike? Well, sort of. Although Shaun is a New Yorker, a city with plenty of high wage earners in its five boroughs (asking price for a seven-room cooperative off of Central Park West: $95 million) he also has to keep an eye on the FHA fund which may (or may not) need to tap Uncle Sam for some cash in 18 months. Late this week NMN’s Brian Collins reported that Donovan is toying with the idea of hiking the 580 minimum FICO at the agency. But before you scream at the top of your lungs, keep in mind that in today’s ultra tight underwriting market, very few (3% of the total) FHA borrowers are at that level. So, it’s not a big deal? Maybe so, but down the road, if FHA isn’t the "government’s subprime lender" then who will play that role? Answer: The private sector.
By
DEC 7, 2012
Comments (2)
Good luck getting the private sector to step into this mess
As a former mortgage worker who started in private money lending and worked 25 years for a major thrift (which failed twice due to it's risky lending policies) and along the way spent several years at a major national subprime lender, I find it interesting that everyone complains about the government's involvement in business but then also complains that the GSE's and HUD do not provide enough support all while private enterprises pile up profits and refuse to get back into the market. When did HUD became the nation's subprime lender? Only when it was necessary to bail out homeowners who were sold subprime loans they couldn't afford by the private sector.
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