Updates enhance the underwriting process to support loans where no borrower has a credit score
WASHINGTON, DC – Fannie Mae (FNMA/OTCQB) today announced innovative enhancements to its automated underwriting system designed to responsibly expand eligibility and further simplify the borrowing process for loans where homebuyers do not have a credit score. These enhancements will help historically underserved borrowers access credit and further support the company’s commitment to serving renters and homeowners in an equitable and sustainable way.
Millions of people in the U.S. are credit invisible, with Black and Latino/Hispanic people disproportionately represented. Close to 15% of Black and Latino/Hispanic people are credit invisible – compared to 9% of their white and Asian counterparts, according to the Consumer Financial Protection Bureau (CFPB). These imbalances reinforce racial disparities in access to credit and quality affordable housing among consumers.
Checking, savings, and investment account data have helped mortgage lenders verify borrower assets and make responsible lending decisions for years. This data can also 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. Fannie Mae’s preliminary research has shown that assessing a borrower’s cash flow activity through bank statement data can make more predictive risk assessments, especially for consumers with no or limited credit history.
“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,” said Malloy Evans, Executive Vice President and Head of Single-Family Business at Fannie Mae. “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.”
Starting mid-December, another wave of enhancements in Desktop Underwriter® (DU®), Fannie Mae’s industry-leading automated underwriting system, will deliver new benefits to borrowers with no credit score and the lenders who serve them. The new enhancements will:
- Update the eligibility criteria for loans where no borrower has a credit score to align with Fannie Mae’s standard Selling Guide requirements, which may help more borrowers qualify for a home loan
- Enable an evaluation of a borrower’s monthly cash flow over a 12-month period to potentially enhance their credit risk assessment
- Simplify the mortgage process by automating the current Selling Guide policy requirement to document nontraditional sources of credit
About Fannie Mae
Fannie Mae advances equitable and sustainable access to homeownership and quality, affordable rental housing for millions of people across America. We enable the 30-year fixed-rate mortgage and drive responsible innovation to make homebuying and renting easier, fairer, and more accessible. To learn more, visit:
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