Monday, December 6, 2010

Have We Learned Nothing From the Past Two Years?

From an article in the Washington Post entitled Are banks unfairly denying certain loan applicants?:
A national consumer coalition plans to file a series of landmark federal fair housing complaints beginning Dec. 6, challenging a widespread practice by banks and mortgage lenders: requiring borrowers who apply for FHA loans to have FICO credit scores well above the 580 minimum set by the FHA for qualified applicants with 3.5 percent down payments....

Because FHA insures lenders against losses from serious delinquency or foreclosure, there is "no legitimate business justification" for rejecting applicants solely on the basis of FICO scores that are acceptable to FHA, the complaints contend.

The identities of the 20-plus mortgage lenders who are expected to be the subjects of fair lending filings were not available in advance. But John Taylor, chief executive of the National Community Reinvestment Coalition, which plans to file the complaints, said they include "large, medium and small banks," all of whom maintain minimum FICO scores higher than what FHA requires.
Did we learn nothing in the past two years from the credit crisis and subprime loans? Shouldn't lending standards be tougher across the board and require a higher downpayment? Credit scores below 620 are considered subprime. And a 3.5% downpayment in today's environment? You must kidding. Only Uncle Sap could guarantee such a sweet deal. But isn't that what got us into trouble in the first place? Are these kinds of government aided market place distortions just setting us up for the next wave of problems? We also have the FDIC showing people how to buy homes with less than 3% down at


  1. Oh my gosh. I am going to start my own coalition then and anyone with a credit score less than 620 cannot default on a loan ever and must go to debtors prison if they don't pay their mortgage.

  2. The only discrimination I'm in favor of is the ability to pay back the loan..... no other factors count. Things like employment history and credit history demonstrate that likelihood.