Tag Archives: Credit Score

The percentage of banks reporting stronger demand for mortgage loans rose in the second quarter, the Federal Reserve reported Monday, with more banks easing lending standards. Those results, revealed in the Fed's Senior Loan Officers Opinion Survey, are consistent with reports that mortgage loans are becoming easier to obtain. While the results suggest a trend in lending standards, they could be misleading: A bank which has tightened standards as much as possible may not necessarily ease them.

Although credit scores play a crucial role in the homebuying process, a recent FindLaw.com survey found nearly a quarter of Americans have never bothered to check their credit report. Overall, 22 percent of the 1,000 adults surveyed said they've never checked their credit report even though credit reporting agencies are required to provide free copies when requested. Out of the 78 percent who said they have checked their credit report, 46 percent checked within the last year.

For the first time since 2008, U.S. households stayed out of financial distress for three consecutive quarters, according to the Consumer Distress Index from CredAbility, a nonprofit counseling agency. In Q4 2012, households scored 71.8 out of 100, an increase from 70.48 in Q3 and 67.60 in Q4 2011. A score below 70 indicates a state of financial distress. Despite the recent improvements, Mark Cole, EVP for CredAbility, warned of threats that still remain.

Subprime credit scores are declining across the country with strong declines in a few rebounding markets, according to Equifax. Designating credit scores below 620 as ""subprime,"" Equifax found the number of subprime borrowers decreased 2.1 percent from the third quarter of 2011 to the third quarter of 2012. The 2.1 percent translates to about 1 million Americans who rose from the subprime category. Equifax also found ""early housing-bust markets"" are experiencing improving credit scores as time passes since the worst of the foreclosure crisis.

Apparently, if one loses his or her home to foreclosure, the waiting period to qualify for another mortgage can easily be another decade. According to a report from the Federal Reserve Bank of San Francisco, a mere 10 percent of borrowers with a history showing a serious delinquency were able to obtain a mortgage again within 10 years. For borrowers who end their mortgage for a reason other than default, they were able to access mortgage credit about two-and-a-half times faster than those who went into default.

The housing crises seems to have led Americans to take a less critical view of strategic default. According to a recent survey that polled 1,026 U.S. adults, 32 percent stated they believe homeowners should be able to strategically default without facing consequences. The online survey was conducted by JZ Analytics on behalf of ID Analytics.

For the first quarter of 2012, the Census Bureau reported the homeownership rate dropped to 65.4 percent, which was a yearly (66.4 percent) and quarterly drop (66.0 percent). Even more significant was the fact that rate had never seen such a low since the first quarter of 1997 when the rate was also 65.4 percent. In a report, Paul Diggle of Capital Economics wrote, ""it's plausible that tight credit, subdued confidence and many more foreclosures will drive the homeownership rate down to 64%.""

An already positive trend in mortgage defaults continued through the month of June, according to data released Tuesday in the S&P/Experian Consumer Credit Default Indices. The data shows that most loan types-including bank card and first and second mortgage loans-saw a decrease in default rates, many of them for the sixth consecutive month. Four loan types posted their lowest rates since the end of the recent recession.

Mortgage lenders remain cautious in terms of credit quality, down payments, and valuations, as evidenced by the findings outlined in the new Origination Insight Report generated by Ellie Mae. The report series tracks the current lending environment for refinance and purchase mortgages, and it indicates the average credit score for loans approved and closed is steadily rising, while acceptable loan-to-value (LTV) ratios are declining. Ellie Mae says mortgage loans closed in February carried an average credit score of 750, with an LTV of 76 percent.

Consumer credit data suggests spending will increase and the housing market will begin to emerge from its slump this year, according to Equifax and Moody's Analytics. Both companies note that as key market data align with pre-recession totals, consumers should anticipate steady economic growth for major credit sectors, including auto, bank card, and consumer finance. While the mortgage lending sector continues to see the highest percentage of delinquencies, it too is showing signs of increased traction in the coming months.