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<< Painting continued from Page 146 “Trended credit reporting looks at
payment and spending patterns, rate
surfers or consolidations, seasonal
users and individuals that frequently
open and close accounts.”
(DU’s) credit-risk assessment, and will benefit borrowers who regularly pay off their revolving debt.
Fannie Mae also has indicated that this process will
not impact the percentage of approve/eligible recommendations, the process of ordering credit reports,
or lenders’ responsibility for reviewing credit reports
underwritten through DU. Lenders are not even
responsible for reviewing the trended data provided
on the credit report.
In fact, many lenders have opted to not show
trended-credit data on their credit reports, but it is
available if needed to get a fuller picture of the credit
risk posed by a borrower. A borrower who pays off a
revolving debt in full each month, for example, is considered a lower credit risk in the DU risk assessment
than one who only pays the minimum due each
Credit scoring models have always been a part of
Fannie Mae’s AUS, but it was mainly driven by the
FICO score at first. Since that time, Fannie Mae has
continually advanced their module to assess borrower
creditworthiness. The enhancements credit-reporting
agencies have made by adding trended-credit data
allow Fannie Mae to better evaluate each borrower’s
willingness to repay.
By utilizing this data, originators, underwriters and
lenders can be better equipped to evaluate a borrower’s true creditworthiness. Whether that borrower is
recovering from the economic crisis or a millennial
struggling with student-loan debt, this new tool may
ultimately help more borrowers achieve their dream
of homeownership. ■
amount of student-loan debt they still have — that
they would be overextending themselves.
These are the type of potential borrowers that originators can educate and guide over time to ensure they
maintain their good credit history so that when they
feel they are in a better position to purchase a home,
they will return to apply for a loan.
It is important that we, as an industry, do not put all
millennials into one category and dismiss them altogether. Each person’s credit is based on different experiences and situations, and originators must understand
that the journey to homeownership is unique for each
borrower rather than use a “one size fits all” approach.
This is where a new way to look at credit history —
trended credit — can help.
Last year, Fannie Mae started requiring credit vendors
to report on trended-credit data to be used as part of
evaluating a borrower’s credit history through AUS.
Trended-credit data is a two-year historical perspective on a borrower’s utilization of credit. This provides
a more in-depth analysis of the borrower’s credit
history and payment trends.
Trended credit reporting looks at payment and
spending patterns, rate surfers or consolidations, seasonal users and individuals that frequently open and
close accounts. According to Fannie Mae, this reporting will improve the accuracy of Desktop Underwriter’s