Fannie Mae is eliminating its 620 credit score floor for loans using its Desktop Underwriter [PB1] system, the GSE announced.
The latest DU Version 12.0 release notes and Selling Guide update includes the change, which would enable more mortgages to be processed through the DU system, though Federal Housing Finance Agency Director Bill Pulte said the change is only a small one in a post on X.
“Our underwriting standards are the same,” Pulte said. “As a process matter, to ensure two scores can be used and not just one, we eliminated requirement for FICO in the infamous ‘guide’. Big deal for consumers. Small or nothing deal for underwriting.”
In eliminating its dependence on the credit score, DU will now instead consider other credit risk factors, including a borrower’s credit history, income, debt levels, property characteristics, and loan purpose.
“The DU risk assessment reflects a comprehensive evaluation of credit risk factors from the borrower’s credit report along with non-credit risk factors from the loan application,” Fannie Mae said its release notes. “Lenders must continue to meet all post-closing quality control requirements to verify the accuracy and integrity of the information used to support the underwriting decision. This includes ensuring all data submitted to DU is true, correct, and complete, and conducting a reverification of credit history.”
Additionally, the Selling Guide has been updated to include terms of enforcement relief of representations and warranties related to undisclosed non-mortgage debt for certain loans underwritten through DU. Mortgage-related debt (including HELOCs and second liens) is excluded from eligibility for relief.
When a final DU submission receives an Approve/Eligible recommendation and a DU message indicating that the loan has obtained relief from enforcement of representations and warranties for undisclosed non-mortgage liabilities, Fannie Mae will not enforce representations and warranties related to non-mortgage debt obtained by the borrower(s) prior to or concurrent with the day of closing.
