Carrington Mortgage Services taking minimum FICO score down to 550

Wells Fargo is also out to make home loans to 'underserved' borrowers with scores below 640

Carrington Mortgage Services LLC wants to boost lending to “underserved” borrowers with FICO scores below 640 — “a sizable market that is largely ignored by today’s lenders,” the company said today in announcing it’s loosening underwriting on FHA, VA and USDA loan programs, extending eligibility to more property types and reducing overlays.

Carrington estimates that 1 in 3 consumers has a FICO credit score below 650, and now the company is prepared to OK mortgages to borrowers with FICO scores as low as 550, as long as they meet other requirements.

Vault image via Shutterstock.
Vault image via Shutterstock.

To allocate resources to serve underserved borrowers, Carrington said it will eliminate conventional and jumbo loans from its wholesale product line on April 1, and limit its acceptance of wholesale submissions with FICO scores above 680. The company will make an exception for veterans, and continue provide VA loans “across the credit spectrum.”

More lenders are willing venture back into territory once considered “subprime,” as rising interest rates have put an end to the refinancing boom and lenders compete for a smaller pool of purchase loans, National Mortgage News’ Bonnie Sinnock reports.

National Mortgage News’ Quarterly Data Reports shows that, among the 15 lenders with the lowest minimum FICO scores, the average minimum during the last three months of 2013 was 571, compared with 599 a year earlier, according to National Mortgage News’ Quarterly Data Report.

Last month Wells Fargo announced it would make FHA loans to borrowers with FICO scores all the way down to 600, well below the previous 642 threshold, which got executives at Realogy and other real estate-related companies cheering.

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In January, Bloomberg News reported that Wells Fargo was training a team of about 400 underwriters to make loans that don’t follow the new “qualified mortgage” guidelines for loans destined to be securitized and sold to investors. Wells Fargo said the company will keep “nonqualified” mortgages on its books, and that they could grow to account for 5 percent of the bank’s originations.


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