In an effort to help underserved borrowers, Fannie Mae has introduced 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. These imbalances reinforce racial disparities in access to credit and quality affordable housing among consumers.
“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 in mid-December, another wave of enhancements in Desktop Underwriter (DU), Fannie Mae’s 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.
