The super-giant Fannie Maw, which is the government controlled financing giant is now more specific and particular about their lending to the borrowers for home loans. It’s a government entity which has been supplying loans to the people since a long time but as time has proceeded their safety checks. From now on this mortgage hose will be inspecting and examining the credit history of a borrower before thy give any loan to them. The approval of the loan will just depend on the background history of the borrower
Fannie Mae has revised its software in terms of the risk assessment option to include the expanded version of the credit report of the borrower. The report will include in depth details about the way the borrower has paid his credit bills over the last two previous years. This will include the difficulty and the ease with which he was able to repay his bills. Sources from Fannie Mae says that this step will be very much helpful to them because this will assist them in executing their task much easily. Firstly, the information will help the officials understand how a borrower is and how he handles all the debts in his life. This will give them a clear picture if the borrower will be able to repay their mortgage loans or not? As a consequence of which Fenny Mae will be able to depict easily if the loan will be turned to default due to inability of borrower to repay or will it be paid.
According to Fannie Mae, its desktop underwriter software is used by approximately 2500 lenders and more than 8000 brokers. This summarizes its high market share. Fannie Mae is a back bone of nearly quarter of new home loans being taken. The difference in the new version and old version is that earlier the credit reports of the borrower just added the balance of the borrower. It also included as to how much of the available credit they use and to assess whether they’re able to do the monthly payments on time or not? The new reporting system is however different as it includes the actual amount paid by the borrower each month over a course of 24-month period. The lender would be able to see if the borrower paid off a card balance in full each month. The new method of extra information will play a fair game and will be in much favor of those borrowers who have credit scores near middle because now they won’t be judged on their middle scores but on their reliable payment history. If they had managed to repay their loans on time so they will qualify for the home loans.
The introduction of new expanded credit reports by Fannie Mae may help to bring in some flexibility to mortgage under writing criteria. This flexibility has been quite rigid since the time of Financial crisis. The market would get opened by this. The changes on the other hand could also be harmful and risky for borrowers who have been less hardworking about paying their card balances. Overall, It’s a good change and could prove to be very fruitful for the financial system.