Fannie Keeps on Pushing the Envelope

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Fannie Mae continues to make changes to their products, pricing and processes in attempts to help lenders provide financing to more home buyers and homeowners.

They rolled out their 97% financing, eased some of their underwriting guidelines, modified reps and warrants and recently expanded their eligibility for high balance loans to better serve creditworthy borrowers in high cost areas.  What more can they do?

Get ready, coming in 2016 will be the new, more delightful, Fannie Mae looking for even more ways to help more lenders provide home financing to more consumers. One way will be through the use of broader credit profiling data (Credit Profiling). What the heck does that mean?

Well, the use of a credit score is no longer enough to make a realistic determination on the credit worthiness of a prospective home buyer. No, the standard by which all credit worthiness has been determined for past several years, ain’t good enough no more.

Credit reports only reflect the status of a consumer’s credit accounts. They no longer provide a detailed history of how people pay those debts.  I think they used to do that in the good old days of manual underwriting.

But, with the onslaught of technology and automated underwriting engines, such mundane information was no longer considered important. The new “credit score” took all that into account and determined the value of a consumer’s credit profile. The FICO score was the answer to every lender’s concerns when it came to credit. All the factors needed to determine the credit profile were already calculated. Like Ragu; it’s in there…

Now we learn that maybe the credit score isn’t enough. Lenders need to take a look at the bigger picture. Look at more credit data to create a credit “profile” for the consumer. SAY WHAT? Ain’t that what underwriters used to do back in the day? Maybe underwriters are important after all and it’s not so easy to replace them with machines.

BTW, Fannie’s got a few more tricks up their sleeve for 2016:

1. Non-traditional loan reviews through their AUS
2. A data and analytics portal for use by consumers and businesses
3. Capability to validate borrower income directly through their underwriting engine.

Talk about a STAR WARS trailer…what’s next? Maybe, lending directly to consumers? Nah, the government wouldn’t do that… would they?

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.