I read an article today in Shelterforce Weekly which talked about “Character Based Loans”. This type of loan would be made by a financial institution to individuals who did not quite meet up to credit standards but had good character, whatever that means. As the article points out, loans of this nature used to be made all the time in a racially discriminatory manner, never to people of color. It seems to me this program is simply grasping at straws to get people into homeownership who do not deserve it.
With my work at HUD, I can say with certainty that bad credit scores were a strong predictor of failure. Loan officers should and do consider mitigating circumstances but cannot overlook really bad credit. Written by Paul Dribin