Fannie Mae is rolling out a set of enhancements in its Desktop Underwriter (DU) automated underwriting system that will deliver new benefits to borrowers with no credit score and the lenders who serve them.
The new enhancements will:
- Update the eligibility criteria for loans where no borrower has a credit score to align with Fannie Mae’s standard Selling Guide requirements, which may help more borrowers qualify for a home loan
- Enable an evaluation of a borrower’s monthly cashflow over a 12-month period to potentially enhance their credit risk assessment
- Simplify the mortgage process by automating the current Selling Guide policy requirement to document nontraditional sources of credit
Checking, savings and investment account data have helped mortgage lenders verify borrower assets and make responsible lending decisions for years, the GSE says. This data can also provide a more comprehensive view into a borrower’s financial health that can help enhance the credit assessment as part of the lender’s underwriting decision. Fannie Mae’s preliminary research has shown that assessing a borrower’s cashflow activity through bank statement data can make more predictive risk assessments, especially for consumers with no or limited credit history.
“We believe consumers should benefit from their responsible money management habits and a steady stream of income when buying a home, even if they don’t have an established credit history,” says Malloy Evans, EVP and head of single-family business at Fannie Mae. “Traditional lending practices make it hard for borrowers with no credit score to access credit, so we’ve taken steps that may help them responsibly qualify for a home loan using data that provides a more holistic view of how they manage their money.”
These enhancements are planned to be available sometime this month.