Wells Fargo will begin origination Federal Housing Administration-backed purchase loans for borrowers with credit scores as low as 600, the Journal reported. The bank previously had a limit of 640 through its retail channel. Borrowers with credit scores below 620 are usually considered subprime.
“The goal is to increase access to credit – especially for low- and moderate-income borrowers and first-time home buyers,” company spokesman Tom Goyda told the Journal. “These are fully underwritten, fully documented loans, consistent with FHA
program guidelines and responsible lending principles.”
Industry analysts have predicted that lenders may ease credit standards this year, since stabilizing home prices and falling refis have left banks hunting for new business, the Journal reported.
Wells has tried easing credit standards before. In 2011, the lender said it would start accepting mortgage applications from borrowers with credit scores as low as 500, though the minimum was later increased to 600 and then 640, the Journal reported. The company was also sued in federal court in 2012 over allegations that the bank was “reckless” in its FHA lending. Wells is fighting the suit, according to the Journal.
Could mortgage lending standards finally be starting to ease? Wells Fargo seems to think so. The big bank has announced that it will lower its minimum credit score for certain government-backed mortgages.