Overview

The credit and lending communities and federal regulators should reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks. The inadvertent response to the "risk layering" inherent in some mortgage products (e.g. no doc,  balloon, negative amortization, or  "teaser rate" mortgages) has been "safety layering" where so many safeguards are being imposed that there is little risk to making new loans.

Credit Scores and the Impact of Foreclosures and Other Credit Problems

Many REALTORS® have questions about FICO scores and the impact of various adverse credit events on the score. A FICO score is a credit score computed using proprietary formulas of the FICO Corporation (formerly called Fair Isaac), but there is not just one FICO score. Read the FAQs below to learn more.

NAR has also prepared a chart showing the impact of various adverse credit events on the ability of consumers to purchase another home with a FHA, Fannie Mae, or Freddie Mac mortgage.

Political Advocacy

Current Legislation/Regulation (bill number or regulation)

H.R. 123, the FHA Alternative Credit Pilot Program Reauthorization Act of 2017

H.R. 435, the Credit Access and Inclusion Act of 2017

H.R. 898/S.1685, the Credit Score Competition Act of 2017

H.R. 3755, the Comprehensive Consumer Credit Reporting Reform Act of 2017


In-Depth

Find NAR's letters, testimonies, bill updates, and more on the NAR Federal Issues Tracker


Legislative Contact(s):

Vijay Yadlapati
vyadlapati@realtors.org
202-383-1090

Colin Allen
callen@realtors.org
202-383-1131

Regulatory Contact(s):

Charles Dawson
cdawson@realtors.org
202-383-7522

What is the fundamental issue?

The housing and mortgage markets have over-corrected in response to abusive lending, poor underwriting, and a serious recession. The result has been excessively tight underwriting criteria.

I am a real estate professional. What does this mean for my business?

Many local housing markets currently suffer unduly tight underwriting criteria. Unless buyers have extremely good credit, policies adopted by the lending  and credit reporting industries can make it very difficult for them to be approved for a mortgage. Fannie Mae, Freddie Mac and federal regulators (e.g. credit scoring, downpayment requirements, rules impacting mortgage liquidity) also affect mortgage capital availability, as well as, the homebuyers' ability to qualify for a mortgage.

NAR Policy:

NAR supports the general principle that all mortgage originators should act in “good faith and with fair dealings” in a transaction and treat all parties honestly. NAR’s Code of Ethics already imposes a similar requirement on REALTORS® , who are required to treat everyone in the transaction honestly. Read NAR's Responsible Lending Policy.

The credit and lending communities and federal regulators should reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks. The inadvertent response to the "risk layering" inherent in some mortgage products (e.g. no doc,  balloon, negative amortization, or  "teaser rate" mortgages) has been "safety layering" where so many safeguards are being imposed that there is little risk to making new loans.

The current book of business at the GSEs and FHA has been referred to as "pristine." NAR believes pristine loans are the result of excessively tight underwriting, not sound business practices. The GSEs and FHA have a public mission to provide mortgage liquidity to qualified homebuyers, including low- and moderate-income families and first-time homebuyers. This mission is being impaired by limits on the availability of credit. NAR believes a reassessment of these policies will not only help well-qualified potential borrowers, but also the entire housing market.

Furthermore, NAR believes that homeownership is an integral part of the American Dream that shouldn’t be out of reach for low-income, rural and minority borrowers who lack access to traditional forms of credit. Unfortunately, many responsible Americans with "thin" credit files have been kept out of the housing market. Thus, NAR supports alternative credit scoring models aimed to responsibly expand mortgage credit for millions of hardworking families.

Additionally, given the increased dependence on credit reports by creditors, employers, insurers and law enforcement, NAR believes Americans should not be penalized by mistakes in their credit reports. Unfortunately, inaccurate credit reports have denied access to mortgage credit or have raised the cost of credit for many prospective borrowers. NAR believes that expanded access to free consumer reports and credit scores will help ensure their credit information is accurate. Moreover, NAR believes that individuals, families and students who have been victimized by unfair, deceptive or abusive acts or practices should not penalized by the malicious acts of others.

Legislative/Regulatory Status/Outlook

NAR has distributed its Credit Policy and met with industry groups and regulators to emphasize the importance of reasonable underwriting policies.

NAR Committee:

Conventional Financing and Policy Committee

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