Blog Articles from Allegiant Mortgage, LLC

Fannie Mae has announced that starting in mid-2016 it will begin incorporating trended credit data into its automated underwriting platform, introducing important changes to help strengthen the home mortgage market for both consumers and lenders.

Trended Credit Data – In mid-2016, Fannie Mae will require lenders to use trended credit data when underwriting single-family borrowers through Desktop Underwriter®. This data will be provided by Equifax and TransUnion, and allows a smarter, more thorough analysis of the borrower’s credit history. Currently, credit reports used in mortgage lending only indicate the outstanding balance and if a borrower has been on time or delinquent on existing credit accounts such as credit cards, mortgages or student loans.  With trended credit data, lenders will have access to the monthly payment amounts that a consumer has made on these accounts over time.  Among other benefits, this will allow lenders to determine if the borrower tends to pay off revolving credit lines such as credit cards each month, or if the borrower tends to carry a balance from month-to-month while making minimum or other payments.  Desktop Underwriter will be updated to utilize this trended credit data, and Fannie Mae will provide additional guidance to in the coming months.

Trended data will expand the credit information used for evaluating a home loan applicant, supplementing the traditional moment-in-time snapshot of an applicant's credit balances with a more dynamic two-year picture of the applicant's history managing revolving accounts. With 24 months of historical data like payment and balance history, lenders will be able to examine and consider how consumers are managing their credit accounts over time

Trended credit data will also help lenders differentiate between "transactors" and "revolvers." A home mortgage applicant with a large credit card balance who has a history of paying in full every month (a "transactor") is typically considered to be a better credit risk than an applicant with a large credit card balance who only makes the minimum required payment (a "revolver"). Existing credit reports, however, can't always differentiate between those two consumers.

As you may be aware, Fannie Mae recently announced a new requirement in which both TransUnion and Equifax “Trended Data” will be utilized in the underwriting of single-family borrowers via Desktop Underwriter.(http://www.fanniemae.com/portal/about-us/media/corporate-news/2015/6305.html)

Fannie Mae is currently targeting a mid-2016 implementation date.

In support of this requirement, TransUnion has announced its plan to retire their Legacy Credit Report. As a result, only the new trended data credit report service will be available for mortgage tri-merge origination, secondary use, and quality control. This new service is called the CreditVision Mortgage Credit Report (“CVMCR”).  

TransUnion has announced there are a number of reasons for this decision, including their beliefs that employing trended data is beneficial to consumers, having the potential to:

  • Open up credit to consumers currently considered “unscoreable”.
  • Improve credit ratings for a significant percentage of consumers, potentially resulting in better rates/terms available.
  • Better identify a consumer’s actual risk, enabling better opportunity to provide the consumer with appropriate mortgage financing options.

 

Please see below for answers to common FAQ’s and how Birchwood will support this change.

Q: What data is Fannie Mae actually requiring and what are the associated formatting changes?

A: It is our understanding Fannie Mae has communicated these requirements in their “Credit Agencies System Integration Guide”.

 

Q: Will all credit reports be impacted?

A: No, only credit reports utilized for mortgage tri-merge originations, secondary use, and quality control will be affected.

 

Q: How will this transition work?

A: In the second quarter of 2016, Birchwood will work with TransUnion to transition existing mortgage tri-merge origination, secondary use, and quality control subscriber codes to accept the new TransUnion CVMCR. Birchwood will provide additional process details as we finalize the delivery approach.

As subscriber codes are transitioned over, Birchwood will deliver the TransUnion CVMCR credit report (in trended data format rather than legacy format) for mortgage tri-merge origination, secondary use, and quality control transactions.

Beginning with the 2016 July billing period, CVMCR pricing will be in effect (this pricing will be announced at a future date).

 

Q: Will there be a testing period?

A: Yes, as mentioned above.

 

Q: Can I adopt the CVMCR format early?

A:  Yes, we will work with Birchwood clients to provide CVMCRs to select end-users prior to Fannie Mae’s proposed July 2016 deadline.  There will be a separate process in which separate subscriber codes will be temporarily established for early adopter end-users after which these codes will be retired as the transition is finalized.

 

Q: Will new Service Agreements be required?

A: Only for early adopters.

Much has been written about Fannie Mae’s new Trended Data mandate, Fannie Mae and the repositories agree to its potential benefits to both consumers and lenders alike.

Starting in July 2016 Fannie Mae's Desktop Underwriter platform will require the integration of trended consumer credit data. This trended credit data will be utilized in assessing credit risk and AUS findings for single-family mortgage applicants. Currently, both TransUnion and Equifax have agreed to provide this trended credit data.

While details of Fannie Mae’s trended data implementation are expected to be announced in the coming months, the use of trended credit data is being described as having the potential to open credit availability to millions of consumers currently considered “unscoreable” under traditional credit scoring models.  Additionally, consumers currently considered “scorable” may have the opportunity to benefit from more favorable mortgage rates and terms going forward.

  • According to a recent TransUnion study over 23 million more consumers could be rated as Super Prime resulting in an opportunity for better rates and terms.
  • TransUnion also predicts the percentage of consumers scored as Super Prime will increase from the current 12% of the population to 21% of the population when trended credit data is utilized.
  • Additionally, the study shows that across the full U.S. population approximately 26.5 million consumers who previously could not be scored by traditional risk scoring can be effectively scored with trended data and be considered a more favorable credit risk. Nearly 3 million of these consumers would be placed into the prime or super prime risk tiers.

Obviously this appears to be a win-win for both borrowers and lenders. Better rates and terms for approximately 23 million more consumers coupled with an additional 26+ million consumers, currently considered “unscoreable”, potentially qualifying for a mortgage.

It’s our hope this advance notice provides valuable insight and assists in answering common questions relative to this change. As more information becomes available from either TransUnion or Equifax we will provide it to you. Again, thank you for your business and we look forward to working with you in 2016. If you have any questions, please contact your sales representative or call the Birchwood Team at (800) 910-0015.

Posted in:First Time Home Buyers and tagged: home buying
Posted by Rose Tignor on February 16th, 2016 7:42 AM

Applying For A Mortgage: Why So Much Paperwork? | Keeping Current Matters

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

  1. The government has set new guidelines that now demand that the bank provebeyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
  2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably at or below 4%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.



Posted by Rose Tignor on October 26th, 2015 11:46 AM

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