Fear of rejection keeps homebuyers on sidelines
New York – June 3, 2014 – Mortgage applications dropped sharply from May 2013 to February 2014 for consumers in all FICO brackets, according to the Federal Reserve Bank of New York.
Application rejection rates declined for all groups except for those with FICO scores below 680; consumers in that bracket were rejected at about six times the rate of those with scores above 760. Not surprisingly, these borrowers were less interested in applying for similar loans in the next year.
"This was the first inclination this group was being treated different and is a direct reflection of the tight credit market," according to Ken Fears, an economist with the National Association of Realtors.
Borrowers with FICO scores below 680 do not expect the outlook to improve. New regulations took effect earlier this year that require lenders to verify that borrowers can afford their loans, and the restrictions have especially impacted first-time buyers.
"Even if you said tomorrow, 'If you want a mortgage and you can breathe, we will give one to you,' I don't think people will be lining up at the door," said Keith Gumbinger of the housing website HSH.com. "They've seen this movie, and they didn't like the ending."
Source: Fox Business Online (06/02/14) Vasel, Kathryn Buschman
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