Freddie Mac to allow cash flow history in underwriting
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Freddie Mac next month will allow lenders and brokers to review a borrower’s bank account data to incorporate positive monthly cash flow history in underwriting, a development it calls an industry-first.
Beginning Nov. 6, a borrower’s positive cash flow data for at least 12 months can be submitted, with the borrower’s permission, for risk assessment in Freddie Mac’s Loan Product Advisor underwriting system, the government-sponsored enterprise said Tuesday. Lenders and brokers can utilize third-party vendors including Blend, Finicity, FormFree and PointServ to obtain the data.
The data can only positively impact a borrower’s credit risk assessment and LPA will notify lenders only when the data’s inclusion into its asset and income modeler will be beneficial, Freddie Mac said. The program is the latest move by the GSE to expand underwriting criteria in efforts to help first-time homebuyers and those in underserved communities.
“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 Terri Merlino, Freddie Mac’s Single-Family senior vice president and chief credit officer, in a statement Tuesday.
The cash flow data can be obtained from a borrower’s checking, savings, investment accounts and monthly bill payments including auto loans, utilities and rent. Freddie Mac in July began accepting loans for automated underwriting based on a borrower’s 12 months of on-time rental payments.
Both GSEs this year began rolling out initiatives addressing equitable housing concerns, including rent-based underwriting strategies and special purpose credit programs. Fannie Mae last month announced its own program to encourage multifamily owners to share renters’ on-time payment data to build prospective homebuyers’ credit profiles.
Freddie Mac last month also said it was taking its first steps in creating a SPCP, which would allow bank and non-bank lenders to originate SPCP loans to benefit Black and Latino borrowers for sale to the GSE.
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