Fannie Mae Changes Will Help Buyers
Wider credit opportunities are in store for home shoppers as Fannie Mae released 10.0, the 31st version of its automated credit decision engine named Desktop Underwriter or DU. The first enhancement is a newly automated credit decision process for borrowers with no-credit-scores, for which Fannie’s term is non-traditional credit. The second is trended credit data being added to your residential credit report, giving more consideration to borrowers who pay their credit card balances off each month. In the past, if mortgage applicants did not have enough traditional credit to generate credit scores, lenders could still manually underwrite and decide on those would-be borrowers.
As a practical matter, few lenders do any manual underwriting for fear of missing something that the automated process detects and having to buy the loan back later from Fannie Mae for not meeting underwriting standards. “You needed at least one score for a traditional Fannie Mae DU approval,” said Mindy Armstrong, Fannie Mae’s DU product manager. For the new no-score automated approval, only your down payment or equity in the event of a refinance, debt-to-income ratios, cash reserves and loan-to-value are considered in the loan decision, according to Armstrong. You will need two sources of non-traditional credit history. “One must be housing related – a 12-month history,” said Kristi Waters, a Fannie Mae credit risk analyst. The other type could be utility bills, child care payments, tuition payments, also on a regular 12-month basis.
Source: The Orange County Register