InfoBytes Blog
Fannie expands underwriting eligibility to help "credit invisible" borrowers
On December 6, Fannie Mae announced enhancements to its Desktop Underwriter to create more homeownership opportunities for “credit invisible” borrowers by changing its automated underwriting system to expand eligibility and further simplify the borrowing process for loans where borrowers do not have a credit score. Fannie noted that close to 15 percent of Black and Latino/Hispanic people are credit invisible (as compared to nine percent of their white and Asian counterparts), explaining that these imbalances lead to racial disparities in access to credit and quality affordable housing. “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,” Mallory Evans, Executive Vice President and Head of Single-Family Business at Fannie Mae, said in the announcement. “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.”
Beginning December 10, enhancements made to the Desktop Underwriter will (i) update borrower eligibility criteria for those with no credit score to align with Fannie’s standard selling guide requirements; (ii) enable the system to evaluate “a borrower’s monthly cash flow over a 12-month period to potentially enhance their credit risk assessment”; and (iii) simplify the mortgage process by automating the current selling guide requirement for documenting nontraditional sources of credit.