Page 36 - September October 2018 Disruption Report Flip Book

FANNIE MAE AND FREDDIE MAC SEJPATN.U-AORCYT.20210818
Will FICO’s new credit score model stimulate homeownership?
Fair Isaac Corp, creator of the FICO credit score, announced plans to roll out a new scoring system, called UltraFICO, in early 2019. In an effort to boost the number of approvals of credit cards, personal loans and other debt for some seven million consumers with low FICO scores, this new credit score factors in a borrowers’ history of cash transactions as an indication of how likely they are to repay debt. UltraFICO will allow consumers to “build their own credit score,” and give permission for access to their bank records and choose which accounts they want considered.
“We have found that that information is exceedingly predictive,” said FICO Senior Director Joanne Gaskin said of consumer banking data. “We have found there is a high correlation between personal finances and ability to repay.” Approximately four million consumers could see an increase of 20 points to their credit score, according to Fair Isaac. UltraFICO can only be used in the non-qualified mortgage space. (Wall Street Journal, AnnaMaria Andriotis, 10/21/18; HousingWire, Kelsey Ramirez, 10/25/18)
Rising rates and higher home prices are weakening the housing market
In a note to clients, Bank of America Merrill Lynch economists, led by Michelle Meyer, wrote:
While housing is no longer a tailwind, its headwinds are blowing very slowly. We are making a number of changes to our housing forecasts, which
reflect a weaker trajectory of sales, starts and home prices. The revisions largely reflect the decline in affordability—which is likely to continue to deteriorate with further increases in rates—and a shift toward more negative perceptions regarding housing (Yahoo Finance, Myles Udland, 10/22/18)
With rates rising, new home sales hit near 2-year lows and inventories are climbing. Existing home sales fell 3.4% in September from August, the lowest level since November 2015. Concurrently, the pace of appreciation in home prices has slowed for the fifth consecutive month (to 5.8%).
Housing has always played a central role in the ups and downs of the U.S. economy—but this time may be different. The housing recovery has been extremely muted and perhaps way less indicative of economic growth trends. (Yahoo Finance, Amanda Fung, 10/30/18; The Punchline, Abraham Gulkowitz, 10/30/18)
According to the National Association of Realtors® (NAR), the profile of home buyers in 2018 consisted of:
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