While mortgage production is growing, the share of borrowers with less than pristine credit appears to be shrinking.

In August, the amount of borrowers with credit scores below 700 fell to around 21%, down from 24% in August 2014 and from a whopping 40% in the run-up to the bust, in August 2005.  Though mortgage rates have remained low and the government has sought to expand mortgage access, the market isn't seeing many borrowers that don't already have strong credit. 

The lack of activity from lower-credit borrowers presents a puzzle for federal regulators and mortgage lenders, which have worked for nearly two years to ease mortgage access. 

It also shows the weak base underpinning today’s housing market.

While the upper echelon of mortgage borrowers has piled into the market with home purchases and refinances at rock-bottom rates, borrowers with any sort of tarnish on their credit reports continue to be shut out or stay away.

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