Freddie Mac to include bank account data as part of underwriting risk assessment.
Freddie Mac has announced that it will include borrower bank account data in its underwriting to identify patterns of positive monthly cash flow. The government-sponsored enterprise (GSE) will begin using such data as part of its loan purchase eligibility assessments in early November. With borrower permission, lenders and brokers can submit financial account data into Freddie’s automated underwriting system, Loan Product Advisor (LPA), to identify 12 or more months of cash flow activity in the tool’s risk assessment. Financial data can be acquired from checking, savings and investment accounts, including those used for direct deposit of income and monthly bill payments. The data obtained in this fashion can only be used to positively affect the borrower’s credit risk assessment.
According to Freddie, the change will help increase homeownership opportunities for borrowers who may fall through the cracks when it comes to established mortgage credit criteria. It’s the latest forward-thinking move from the GSE, which also began to consider on-time rent payments in its underwriting this past summer. “With the addition of positive monthly cash flow data, our underwriting system can help with more accurately predicting a borrower’s ability to pay their mortgage because it uses a comprehensive view of how personal finances are managed over time,” said Terri Merlino, Freddie Mac Single-Family senior vice president and chief credit officer. “Our latest innovation levels the playing field and helps make homes more accessible to borrowers whose lenders might not have qualified them with traditional methods of underwriting. This should particularly help first-time homebuyers and underserved communities.” To make it easier to recognize opportunities where bank account data could help strengthen a borrower’s credit profile, LPA will automatically notify lenders when an application could benefit. Freddie announced that several service providers are already supporting the new process, including Blend, Finicity, Formfree and PointServ.
Source: Scotsman Guide