One element contributing to tightened credit requirements is lenders’ reluctance to originate loans offered towards the enterprises that are government-sponsoredGSEs) Fannie Mae and Freddie Mac.
Is Credit Too Tight?
Because loan providers have tightened their credit requirements, they’re not serving a number that is significant of possible borrowers. Borrowers with less-than-pristine credit and paperwork are struggling getting mortgages. Researchers in the Urban Institute estimate that if lenders had applied the exact same credit requirements that were utilized in 2001 — before the loosening of criteria from the housing crisis — they might have granted yet another 5.2 million mortgages between 2009 and 2014. 11 They realize that between 2001 and 2014, the amount of borrowers with FICO scores above 700 reduced by 7.5 percent, the quantity with ratings between 660 and 700 declined by 30 %, plus the quantity with ratings less than 660 reduced by 77 per cent. 12