Although mortgage underwriting standards were much too loose during the “go-go” years of 2004 to 2007, the pendulum on credit standards has swung too far the other way, according to a new report from Amherst Securities.
“Subsequently, guarantors and originators seem to have overacted,” writes a team of Amherst analysts lead by Laurie Goodman.
Goodman notes that FICO scores—a key measure of credit availability—rose to 747 in 2011, compared to 698 in 2006.
In particular, Amherst is talking about Fannie Mae and Freddie Mac loans, which today fund about 70% of all new originations.
Amherst notes that lending standards in FHA/VA programs have remained “roughly constant” with more activity gravitating toward the two programs.
During the height of the subprime boom, GNMA-related loans accounted for just 3% of all residential lending, according to figures compiled by National Mortgage News.
Goodman cautions that it’s “increasingly difficult for borrowers who are ‘outside the credit box’ to qualify for a mortgage.” She laments all this is happening at a time when housing affordability “is at a generational high.”
