The GSE's underwriting guidelines now include assessment of a borrower's cash flow activity
Fannie Mae has updated the loan eligibility criteria of its automated underwriting system to help more borrowers qualify for a mortgage.
The government-sponsored entity has announced making several enhancements to its automated underwriting system that aims to “deliver new benefits to borrowers with no credit score” and increase access to credit and quality affordable housing.
Starting mid-December, Fannie Mae will enable the evaluation of a borrower’s monthly cash flow over a 12-month period to potentially enhance their credit risk assessment as part of the lender’s underwriting decision. The enhancements also include automating the current selling guide policy requirement to document non-traditional sources of credit.
“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,” the GSE said in a statement.
“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 Fannie Mae’s single-family business. “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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