Starting on Monday, it could get a bit easier for borrowers to get a mortgage.
New guidelines from Fannie Mae and Freddie Mac that go into effect December 1 relax the standards that lenders have been using to approve mortgages, The Wall Street Journal reports. Specifically, some lenders will now be able to move forward with borrowers that have a credit score of 620, the lowest backed by Fannie and Freddie, among other changes.
Previously, banks often had more stringent standards than Fannie and Freddie. Those standards, called “overlays,” made the bar higher for borrowers hoping to secure a mortgage from a bank in spite of lower requirements from the two mortgage giants. The Journal reports that several banks, including Wells Fargo and Sun Trust, are getting rid of their overlays in light of the update to the guidelines.
The Urban Institute said that relaxed standards could open up mortgages to about 1.2 million people. The same institute reported earlier this year that 1 in 3 Americans with a credit report had debt in collections. The relaxed rules will now probably make it easier for people with one-time lapses in their credit history to get a mortgage.
This article originally published at http://dc.urbanturf.com/articles/blog/lenders_relax_standards_for_mortgage_borrowers/9278
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