Sub-Prime is Back: Wells Fargo Lowers Credit Score for FHA Loans

Isn’t this how the last real estate crisis happened?  Offering credit to those who really didn’t have the necessary credit background to qualify?  Here we go again.  Sub-prime mortgage lending is back, baby!  Wells Fargo Bank has announced it will now accept scores as low as 600, down from 640, for FHA and VA home loans.  Government-backed loans for the sub-prime market.  What could go wrong?  These loans can put consumers into a home with a down payment as low as 3.5%.  And, of course, the government will be on the hook for it if these mortgage deals don’t work out as planned.


With this move, other banks have taken notice, including Chase Bank and Bank of America.  Apparently, this move was spurred by a decrease in home loan refinancing and the desire of the banks to extend more credit.  Uh huh.  That is code for “we need to make more money”.  Some lessons never actually get “learned”.  While there may be no education in the second kick of a mule, it can be quite rewarding if you aren’t the one on the receiving end of the mule’s kick.


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Kevin Fallon McCarthy

Kevin Fallon McCarthy is the McCarthy Law PLC’s managing attorney and an experienced Phoenix debt attorney. Mr. McCarthy has also worked as general counsel for a large corporation. He has corporate counsel experience in human resource matters, general corporate governance, and union class action litigation.