Slightly lowering credit score requirements for new borrowers isn’t likely to raise their overall risk profiles, according to industry stakeholders.
Louis Amaya, co-founder and chief investment officer of National Asset Direct Inc., a San Diego-based residential mortgage investment and originator, said his company plans on opening up the credit spectrum to borrowers with slightly lower than usual FICO scores and higher debt-to-income ratios.
iServe Residential Lending, NAD’s lending subsidiary, plans on increasing credit to borrowers with lower credit profiles in the next three or four months, Amaya said.
It currently offers FHA, government-insured and jumbo loans and directly securitizes its loans with Ginnie Mae.
Amaya said by securitizing directly through Ginnie Mae, it is able to avoid the additional investor underwriting requirements that prevented it from extending credit to less-than-perfect borrowers.
Clem Ziroli, president of First Mortgage Corporation, a mortgage lender in Ontario, California also said that his company is ramping up its originations for borrowers with lower-than-perfect credit scores.
Banks such as Wells Fargo set the bar at 640, which is disproportionate to the number of actual qualified borrowers, says Ziroli. Unlike most companies, his company is able to make loans for borrowers with FICO’s less than 620 without compromising delinquency rates, he said.