Longer Credit History Reporting May Impact Mortgage Decision

Long credit history may affect mortgage lendingStarting in June 2016, mortgage lenders using Fannie Mae’s underwriting will be required to use trended credit data when underwriting single-family borrowers.  Trended credit data gives lenders a more detailed history of the consumers credit utilization over a longer period of time. Now, lenders have access to the monthly payment amounts that a consumer has made on these accounts over a 30 month period.

“Fannie Mae wants to be the partner of choice for lenders,” said Timothy J. Mayopoulos, President and Chief Executive Officer, Fannie Mae. “Our aim is to help lenders serve their customers efficiently so that more qualified borrowers have access to mortgage credit. We are enhancing our offerings, improving our tools and innovating through the technology we provide to our customers. Our goal is to make sustainable homeownership a reality in communities across the country while reducing risk for taxpayers.”

Among other benefits, trended credit data will allow mortgage underwriters to analyze a consumer’s credit patterns, such as if revolving credit balances are paid in full each month, or only minimum payments are being made and the borrower tends to carry a balance from month-to-month.

It’s uncertain how this data is going will be used by mortgage underwriters. FICO & VantageScore credit scores currently do not consider trended credit data. So the big question becomes what is more important on the borderline applicant: the credit score or the credit trend?