Higher Credit Scores Required by FNMA

Fannie Mae, the largest U.S. mortgage-finance company, told lenders it will no longer buy most loans made to borrowers with credit scores below 580 as it tightens lending standards amid a slumping housing market.

The government-chartered company, which owns or guarantees more than 20 percent of the $11.5 trillion of home loans outstanding, said the rule goes into effect June 1, though it advised lenders to make their adjustments immediately, according to guidelines dated March 31.

The change will make it more difficult for borrowers with damaged credit to get a home loan, unless they can obtain mortgage insurance from the federal government. Fannie Mae and its main competitor, Freddie Mac, began introducing or raising fees late last year on mortgages they buy from banks because of rising loan defaults and a slump in home sales and prices.

Source – Bloomberg