Fannie Mae Updates Underwriting To Help 'Credit Invisible' Borrowers

Fannie Mae Updates Underwriting To Help 'Credit Invisible' Borrowers

Starting mid-December, Fannie Mae will launch several enhancements to its automated underwriting system that will "deliver new benefits to borrowers with no credit score" in an effort to increase access to home financing and affordability.


In its preliminary research, Fannie Mae discovered that assessing a borrower's cash flow activity via bank statement data can make better predictive risk assessments, particularly for consumers with no or limited credit history.


Cash flow activity is just one of several factors considered 'invisible credit' --a factor Fannie Mae will now consider as they assess creditworthiness.


The updates to the automated underwriting system now include the following:

  • Evaluating a borrower's monthly cash flow over a 12-month period.
  • Updating the eligibility criteria where no borrower has a credit score that meets Fannie Mae's standard Selling Guide requirements to help more applicants with 'invisible credit' qualify for a home loan
  • Simplifying the mortgage process by automating the current Selling Guide policy requirement to include nontraditional sources of credit


Malloy Evans, head of Fannie Mae's single-family business, stated that this change stems from the view that "... consumers should benefit from their responsible money management habits... even if they don't have an established credit history."  


"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."

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