Fannie Mae is enhancing its automated underwriting system to improve the analysis of credit histories and the use of nontraditional credit.
Loans underwritten on Desktop Underwriter will require the utilization of trended credit data provided by Equifax and TransUnion.
According to the secondary lender, by using trended data, a more intelligent and thorough analysis of the borrower’s credit history will be enabled.
Fannie announced the planned update on Monday.
The Washington-based company explained that credit reports currently used in mortgage lending only indicate the outstanding balance and whether a borrower has been on time or delinquent in paying existing accounts like credit cards, mortgages or student loans.
But trended data will indicate monthly payments made over time — enabling lenders to determine if revolving credit lines are paid off each month or if a balance is carried from month-to-month while making minimum or other payments.
Trended data requirements will be implemented around the middle of next year, while more details will be provided in the coming months.
DU is also being enhanced to more efficiently address borrowers without a traditional credit history. More information will be available in the coming months, and the functionality is expected to be live sometime next year.
One other change outlined in today’s announcement is the integration of The Work Number from Equifax into DU. As a result of the enhancement, which will also happen sometime next year, lender’s won’t have to provide copies of pay stubs or other documents to verify income.
“In addition to efficiency for borrowers and lenders, this could reduce the frequency of mortgage fraud,” the notice said. “Going forward, Fannie Mae will determine if validation services can be offered for additional borrower data, such as bank statements, and additional income documents, such as tax returns.”
