| By Greg Fisher, creditscoring.com
Statistics for U.S. government guaranteed mortgage loans show an upward FICO score trend.
According to the U.S. Housing and Urban Development Department, in a period of 19 months–January, 2008 to August, 2009–the average credit score for FHA insured mortgage loans increased 71 points, from 621 to 692.
In a letter to the Wall Street Journal, FHA commissioner David Stevens writes: "The Journal's editorial 'Subprime Uncle Sam' (Sept. 29) leaves readers with the impression that the Federal Housing Administration (FHA) is on the brink of disaster. The Journal's editorial board is just plain wrong."
Recent dynamics in the purchase market have improved the financial health of FHA. Due to the pullback by PMIs, the average credit quality of FHA borrowers had improved significantly in the last two years. The average FICO score for all existing FHA borrowers is 693, compared to 633 two years ago. Two years ago, nearly half of all FHA purchase borrowers had a FICO less than 620; today that number is only 7.5 percent.
Subcommittee chairwoman Rep. Maxine Waters [D-CA] comments:
"It is a myth that FHA is the new subprime and has adopted lower underwriting standards and the other worst abuses of the subprime market. In fact, just the opposite is true. A recent Federal Reserve report indicates that over 60 percent of the increase in FHA purchase activity between 2007 and 2008 was to borrowers with prime-quality FICO scores."
HUD defines two "Sub-Prime" categories with FICO scores below 660.