Lenders continue to reject borrowers with otherwise good credit when they diverge from the standard approval checklist.

Would-be borrowers facing the most problems include the self-employed.

One reason bankers are so nervous are the standards held out by Fannie Mae and Freddie Mac. Not only are Fannie and Freddie demanding credit scores above 720, they are refusing to buy back defaults when the original mortgage application had small discrepancies from the norm. To avoid losses, lenders are being extra careful.

The result is that some borrowers are being rejected for problems that seem completely inconsequential.

Source: The Wall Street Journal, James R. Hagerty and Nick Timiraos (07/10/10)