Industry News

Feds warn FHA lenders on FICO scores

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Will qualified homebuyers who have credit scores below 620 be able to get an FHA mortgage in 2012? Or are many lenders still maintaining arbitrary FICO cutoff scores of 620 to 640, despite the fact that FHA itself accepts scores down to 500?These are important, ongoing questions at HUD, where acting FHA commissioner Carol Galante told me last week that "we remain concerned that some lenders" are rejecting applicants "solely on the basis of (their) credit score," which has the potential to violate the federal Fair Housing Act. Meanwhile, HUD's equal opportunity enforcement office is continuing investigations of 23 lenders' underwriting practices to determine whether they give applicants for FHA loans a fair shot, even if their FICO scores are low. Though officials say they can't discuss individual cases or negotiations, industry sources report that some are moving toward settlement agreements with HUD while a handful of others may end up at the Justice Department fo...