In October, Fannie Mae announced that beginning in mid-2016 it will be rolling out a series of new updates – including a credit scoring system designed to lower risk – in hopes to simplify its mortgage offerings. As part of these updates, Fannie Mae is collaborating with Equifax and TransUnion to require lenders to use trended credit data when underwriting single-family home loans.
In place of the current system that only indicates a borrower’s total outstanding debt and whether or not he or she has made timely payments, the new system will inform lenders of the payment amounts made by the borrower and how those payments impacted the debt over time. This additional detail will allow lenders to see, for example, if a borrower makes minimum payments on a credit card account or if the balance is paid in full each month.
“Our aim is to help lenders serve their customers efficiently so that more qualified borrowers have access to mortgage credit,” said Timothy Mayopoulos, president and CEO of Fannie Mae.
This new system will help lenders improve the evaluation of risk and ultimately safeguard and strengthen the home mortgage market. Moreover, it will help to extend mortgages to deserving borrowers who exercise responsible credit use. As an added bonus, the underwriting process will be streamlined through the use of Equifax verification services.
A recent analysis performed by TransUnion found that the use of trended data can potentially impact vast numbers of consumers in the housing market through better pricing and access to mortgage loans.
“We are enhancing our offerings, improving our tools and innovating through the technology we provide to our customers. Our goal is to make sustainable homeownership a reality in communities across the country while reducing risk for taxpayers,” commented Craig Crabtree, general manager of Equifax Mortgage Services.
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