TIP OF THE DAY- BORROWERS WITH NO FICO

TIP OF THE DAY- FHLMC and FANNIE NO FICO SCORE BORROWER.

The representative credit score for the mortgage loan is determined based on the credit scores of each borrower and is used to determine loan eligibility and for pricing purposes (i.e., assessing LLPAs). Follow these steps to calculate the representative credit score for a mortgage:

Step

Description

1

Fannie Mae recommends obtaining at least two credit scores for each borrower.

2

Select a single applicable score for underwriting each borrower.

·         When two credit scores are obtained, choose the lower score.

·         When three credit scores are obtained, choose the middle score. (If two of the three scores are the same, choose the middle of the three scores. For example: 700, 680, 680 = 680; 700, 700, 680 = 700)

3

If there is only one borrower, the single applicable score used to underwrite that borrower is the representative credit score for the mortgage.

If there are multiple borrowers, determine the applicable credit score for each individual borrower and select the lowest applicable score from the group as the representative credit score for the mortgage. If there is a borrower on the loan who does not have a credit score, determine the representative credit score for the mortgage based on the credit scores of the other borrowers on the mortgage.

 

Freddie 

 

Identifying the Indicator Score for the Mortgage when a minimum Indicator Score is required When a minimum Indicator Score is required to establish eligibility for the product offering, it must be met or exceeded for the Mortgage to be eligible for delivery to Freddie Mac. Before the Seller can identify an Indicator Score, the Seller must select a single FICO score for each qualifying Borrower as described above. If a Borrower has no usable FICO score, so no Underwriting Score can be identified for that Borrower, the Seller may use the Underwriting Scores for the remaining Borrowers to identify the Indicator Score. If no Borrower has a usable FICO score, and an Indicator Score is required for the Mortgage to be eligible, there can be no Indicator Score for the Mortgage and it is not eligible for sale to Freddie Mac. The minimum Indicator Score requirements for Mortgages are noted in the individual chapters or sections for the product offerings and in Exhibit 25. There are three methods of identifying an Indicator Score, as described in more detail below. Freddie Mac:

·         Permits the Seller to use any one of three methods

·         Prefers the Seller use one method for all their loans

·         Recommends the Seller use the middle/lower then lowest method to identify an Indicator Score

DU Loan Casefiles: At Least One Borrower Has No Credit Score and Another Borrower Has a Credit Score

If one (or more) borrower(s) has a credit score and at least one borrower does not have a credit score, then DU will apply the following requirements:

·         The property must be a one-unit, principal residence, and all borrowers must occupy the property.

·         The transaction must be a purchase or limited cash-out refinance.

·         The loan amount must meet the general loan limits—high-balance mortgage loans are not eligible.

·         Reserves may be required as determined by DU.

·         If the borrower(s) with a credit score is contributing more than 50% of the qualifying income, the lender is not required to document a nontraditional credit history for the borrower(s) without a credit score.

·         If the borrower(s) with a credit score is contributing 50% or less of the qualifying income, the lender must document a nontraditional credit history for each borrower without a credit score. See B3-5.4-03, Documentation and Assessment of a Nontraditional Credit History (08/30/2016), for additional information.

 

How does this affect you ? If you have multiple borrowers and one does not have a credit score, and you have an approve/eligible or approve/accept from your AUS findings we can do the loan in- house (delegated).  You must have an eligible AUS to be able to use the borrower with no fico score.

justin brown