The federal administration is meeting with bankers in order to address why many potential consumers are being denied credit. Lenders increased their requirements after the subprime crisis and as a result access to credit is currently one fourth of what it was prior to 2004.
Statistics show that prospective home buyers with a score less than 640 are being shut out of the market. Fannie Mae and Freddie Mac have set requirements including the Fico score, debt to ratio income and proof of income. However, lenders are setting their requirements far above what Fannie Mae and Freddie Mac have set as minimums because historical data have shown that buyers with higher scores are less likely to default.
Various lenders have had massive legal settlements for loans that went into default. A few mortgage companies that were too lenient in the past have gone out of business and as a result lenders feel they have to be extra prudent. One major concern is the possibility of home buyers defaulting 5 or 10 years into their loan. As a result lenders want the government to create clear and concise as to what they will be held responsible down the road.
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