Fannie Mae announced enhancements to its automated underwriting system to help more borrowers without credit scores obtain homeownership. 

The GSE said the enhancements are “designed to responsibly expand eligibility and further simplify the borrowing process” for historically underserved borrowers who lack access to credit.

CFPB data shows that millions of people in the U.S. are credit invisible. Of those, 15% are Black and Latino/Hispanic while 9% are white and Asian.

“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.”

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

The enhancements will go into effect in mid-December, the GSE said.

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