The Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices indicates that lenders began tightening mortgage credit standards in 2007 and have not significantly eased standards since.7 Terms and standards have tightened most for borrowers with lower credit scores and with less money available for a down payment.
For example, in April nearly 60 percent of lenders reported that they would be much less likely, relative to 2006, to originate a conforming home-purchase mortgage to a borrower with a 10 percent down payment and a credit score of 620 – a traditional marker for those with weaker credit histories.8 As a result, the share of home-purchase borrowers with credit scores below 620 has fallen from about 17 percent of borrowers at the end of 2006 to about 5 percent more recently.9 Lenders also appear to have pulled back on offering these borrowers loans insured by the Federal Housing Administration (FHA).