Narrow Credit Box Will Expand

WE’RE HEARING HUD secretary Shaun Donovan knows how to get a crowd of mortgage bankers up out of their seats and applauding.

At the Mortgage Bankers Association’s recent Washington conference, Donovan was asked about Credit Watch. And he said—Yes.

Yes, FHA needs to fix Credit Watch so every lender isn’t forced into the same narrow credit box.

“If everyone is doing super pristine credit and you are doing just pristine credit—you shouldn’t be punished,” he said.

“I think we can adjust Credit Watch to get to a reasonable standard that is aligned for the times we are living in,” the secretary said. HUD is asking Congress for more flexibility with respect to Credit Watch.

Donovan was also asked about FHA adopting risk-based pricing. But his first response was not greeted with applause. “I am not a big believer in that.” And he went on to say that FHA’s level pricing structure is better suited to the agency’s mission.

He stressed that FHA has raised its premiums to the point where any further increases could threaten the housing recovery.

“I believe we have the pricing about right at this point.”

But risk-based pricing would put FHA in direct competition with private capital. “FHA is not created to compete with private capital. In times like we have seen in the past few years, we do attract higher credit score borrowers,” he said.

As conditions improve, FHA’s market share ought to decline as its lenders become more focused on lower-wealth borrowers and others who can be good credits but are having a hard time accessing credit.

“I believe if private capital can do that loan, they ought to do it,” Donovan said.

A few MBA members clapped and many realized that their days of dealing with 700 credit score FHA applicants may be numbered.

SWEET TWEET: If you aren’t already, you should become a follower of our National Mortgage News Twitter feed (at www.twitter.com/natmortgagenews). We already have 14,000 followers, so Lady Gaga is feeling us hot on her heels (I guess she’s still a couple [million] ahead of us in followers). We’re getting close to our 5,000th tweet. We usually link to anything of interest on our own website but this past week we also tweeted extensively from our own Mortgage Servicing Conference in Dallas and we’ve even been known to tweet a mortgage joke (but remembering the adage “Dying is easy, comedy is hard”) like this one from the recent MBA Mortgage Technology show: “Old mortgage technologists never die, they just fade into the cloud.”

MOST EMAILED: The most emailed content from http://www.nationalmortgagenews.com this week was Lew Sichelman’s story about how the increase in remodeling that will be prompted by increasing home sales will also lead to an increase in home improvement lending. There’s a niche that has been gathering dust for a couple of years now!

OUT OF THIS WORLD: Our Grapeviners at www.mortgagegrapevine.com remain fascinated with space debris. We broke a world exclusive a few weeks back by bringing you a discussion in how to price pieces of the big meteor that came down in Russia. Looks as if they are still trying to corner the market for alien rocks! Check it out here.

SHOUT OUT: The big boys like Wells Fargo and Bank of America take it on the chin a lot, so this week we are going to be kind. We’ve been giving a shout out to any mortgage firm that makes ten net new hires in a year, feeling that that is the way out of our tepid mortgage and national economic recovery. B of A recently announced it would be hiring a large number of new officers, so this week’s shout out goes to them!