Bernanke Says No lending to Creditworthy Borrowers Slows Housing

By Stevie Duffin Updated on 9/25/2013

Lenders who are not willing to give loans to potential borrowers meeting underwriting guidelines set by Fannie Mae and Freddie Mac are actually slowing down United States economic recovery according to Chairman Bernanke.

When Federal Reserve Chairman Ben Bernanke spoke at the International Builders Show in Orlando, Florida, he said that the federal government is lowering interest rates to all time lows so that creditworthy people can get loans and refinance existing mortgages which in turn will help boost the housing industry.

However, there are fewer than half of lenders are offer loans to borrowers with a FICO score of less than 620 and a down payment of 10%.  These loans are well within the GSEs' purchase parameters.

The reasons according to Bernanke are that may be private mortgage insurance (PMI) required by the GSEs are hard to get, or concerns that relate to representations and warranties, which are contractual commitments by an originator concerning the quality of the loan.