WASHINGTON—Freddie Mac has introduced a new underwriting model that is said is aimed at qualifying more borrowers for a mortgage.
According to the company, the new model will include a “review of a borrower’s bank account data to identify a history of positive monthly cash flow activity as part of its technology's loan purchase eligibility assessments.”
What Freddie Mac described as an “innovation” will be available to mortgage lenders though its automated underwriting system, Loan Product Advisor (LPA), beginning Nov. 6, and will aim to increase homeownership opportunities for first-time buyers and underserved communities, NAFCU noted.
“Our latest innovation levels the playing field and helps make homes more accessible to borrowers whose lenders might not have qualified them with traditional methods of underwriting,” said Freddie Mac single-family senior vice president and chief credit officer Terri Merlino. “This should particularly help first-time homebuyers and underserved communities.”
Borrower’s Permission Required
The updated model requires the borrower’s permission and allows lenders to submit financial account data to LPA to “identify 12 or more months of cash flow activity for inclusion in the tool’s risk assessment.” Any submitted account data can only have a positive effect on the borrower’s credit risk assessment, Freddie Mac said.
Freddie Mac further stated lenders can “obtain the financial account data from designated third-party service providers using the same automated process they currently use,” when verifying income, employment, and assets.
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