Lenders may be easing up on underwriting standards as the proportion of loans with FICO scores below 700 has risen dramatically.
According to Ellie Mae’s Origination Insight, 48% of mortgages originated in June had credit scores less than 700 versus only 28.53% of all mortgages one year ago, in June 2012.
The results may be indicating that lenders are looking to ease-up on some areas of underwriting guidelines to make up for slowing originations, said Louis Amaya, head of National Asset Direct, a real estate and mortgage investment and management company.
The report also showed that there was a more diverse FICO distribution across originations. Loans with 700+ FICO scores still make up the vast majority (52%), but there was a larger number of originations in both the 621 to 659 category (up to 15.41% from 8.15%) and in the 660 to 699 category (18.34% to 29.80%).