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Fannie Mae changes underwriting to help ‘credit invisible’ borrowers

The goal is to expand mortgage loan eligibility and simplify the loan process for underserved borrowers without credit scores

Fannie Mae announced on Tuesday that it will make changes to its automated underwriting system in order to expand mortgage loan eligibility and simplify the loan process for underserved borrowers without credit scores.

The enhancements are slated to roll out in mid-December and will include an update to borrower eligibility criteria to align with Fannie Mae’s standard selling guide requirements for loans in which the borrower has no credit score, according to a press release from the government sponsored enterprise.

In addition, the selling guide policy requirement will be automated to document nontraditional sources of credit and enable the evaluation of monthly cash flow via borrowers’ bank statement data.

The goal is to 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,” according to the GSE.

“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,” Malloy Evans, Executive Vice President and Head of Single-Family Business at Fannie Mae, said in a statement. 

According to Fannie Mae, millions of Americans are credit invisible, meaning that their documented credit history is so limited that they are lacking credit credit scores or that their scores are not based on a complete debt repayment history.


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Rates of credit invisible Black and Latino/Hispanic borrowers are disproportionately higher than other demographics. Nearly 15% of Black and Latino/Hispanic Americans are considered credit invisible, according to the Consumer Financial Protection Bureau (CFPB), while just 9% of their white and Asian counterparts fall into this category.

These types of imbalances reinforce the racial disparities related to credit and quality affordable housing access, according to Fannie Mae. Without credit scores or full credit histories, borrowers face more hurdles in mortgage lending, as credit information is a vital part of the mortgage underwriting process.

“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,” Evans said.

According to the Fannie Mae, its preliminary research has shown that using bank statement data to assess a borrower’s cash flow activity can make more predictive risk assessments — especially for those with no credit score or limited credit history.

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