Loan Product Advisor Updates
February 3, 2017
We're Expanding Homeownership Opportunities to More Borrowers Without Credit Scores
To expand homeownership opportunities to more borrowers, we're updating Freddie Mac Loan Product Advisor® this spring so you can assess mortgages for borrowers without credit scores. The following Loan Product Advisor changes will apply to mortgages submitted for the first time once we've updated Loan Product Advisor.
We'll update the Freddie Mac Selling System® by early summer to accept delivery of Loan Product Advisor mortgages for the "no credit score" capability.
New Requirements for Mortgages for Borrowers Without Credit Scores
Currently, mortgages for borrowers without credit scores must be manually underwritten. New requirements for Loan Product Advisor to allow the assessment of these mortgages include:
- Must be a purchase or a "no cash-out" refinance mortgage.
- Must be secured by a 1-unit property and all borrowers must occupy the property as their primary residence.
- Loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios must not exceed 95%.
- Must be a fixed-rate mortgage.
- Must not be:
- A mortgage secured by a manufactured home.
- A super-conforming mortgage.
If a transaction does not meet the above requirements, Loan Product Advisor will return an incomplete message(s).
Additional Requirements for Accept Mortgages
For Accept mortgages, the Seller must determine that the mortgage meets the following additional requirements:
- Each borrower must have at least two payment references in the United States comprised of Noncredit Payment References and/or tradelines not appearing on the credit report. If two or more borrowers have the same payment reference, then the payment reference may count for each of those borrowers.
- Each payment reference must be for at least the most recent 12 months.
- At least one borrower must have a housing payment history as one of the payment references.
- In the event more than one borrower has a housing payment history, then all such housing payment histories for the most recent 12 months (or length of housing payment history if less than 12 months) must be verified.
- All housing payment histories must have no 30-day or greater delinquencies in the most recent 12 months.
- For all payment references other than housing, only one payment reference may have one 30-day delinquency and no 60-day or greater delinquencies in the most recent 12 months; all other payment references must have no 30-day or greater delinquencies in the most recent 12 months.
- Each payment reference must:
- Meet the requirements for written verifications in Guide Section 5102.3,
- Meet the age of documentation requirements in Guide Section 5102.4, and
- Be documented in accordance with Guide Section 5202.2(b).
- Each borrower must have no collections (other than medical), judgments or tax liens filed in the most recent 24 months.
- When the credit reputation for all borrowers is established using only Noncredit Payment References, then at least one borrower must participate in a homeownership education program before the note date, or the effective date of permanent financing for Construction Conversion and Renovation Mortgages.
- The Loan Product Advisor Feedback Certificate will include a feedback message to alert Sellers that the requirements mentioned above must be met.
- For Caution mortgages, the mortgage must be manually underwritten in accordance with the Seller's purchase documents.
- For mortgages where no borrower has a credit score, Loan Product Advisor will determine the maximum monthly debt payment-to-income ratio.
Pricing Guidelines for Mortgages Where No Borrower has a Credit Score
Mortgages where no borrower has a credit score will be charged the below 620 Indicator Score/Loan-to-Value Fee on Exhibit 19 of the Single-Family Seller-Servicer Guide (Guide).
Updated Requirements for Mortgages Where Not All Borrowers have a Usable Credit Score
While Loan Product Advisor currently assesses mortgages where not all borrowers have a usable credit score (at least one borrower has a usable credit score and at least one borrower does not have a usable credit score, as determined by Loan Product Advisor), we are revising certain requirements as follows:
|Requirements for mortgages where not all borrowers have a usable |
|Current requirements||Revised requirements|
|If a transaction does not meet the following requirements, Loan Product Advisor returns an incomplete message(s).
||Same as current requirements.|
Borrowers with a usable credit score contribute more than 50% of the total monthly income.
If a transaction does not meet this requirement, Loan Product Advisor returns an incomplete message.
Requirement removed and replaced with:
For Accept mortgages, if the borrower(s) without a usable credit score contributes 50% or more of the total monthly income, then each borrower without a usable credit score must meet the same credit history requirements that apply to mortgages where no borrower has a credit score (e.g., at least two payment references). *
The Loan Product Advisor Feedback Certificate will include a feedback message to alert the Seller when these requirements must be met.
|Borrowers without a usable credit score are not self-employed.||Requirement removed.|
|For all borrowers without usable credit scores, any debt that is not reported to the credit repositories must be verified to have a satisfactory payment history and the payment must be included in the monthly debt payment-to-income ratio.||Requirement removed.|
*For Caution mortgages, the mortgages must be manually underwritten in accordance with the Seller's purchase documents.
The Guide will be updated with all of the requirements noted above, and include the effective date of the changes, in a Guide Bulletin prior to Loan Product Advisor being updated.
Please review the Loan Product Advisor No Credit Score Release Feedback Messages.