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     | Friday, February 23, 2001 - 09:37 pm  From http://www.fanniemae.com/news/media/faqs/faqs.html "I've heard that Fannie Mae is planning to discontinue the use of credit scores in its automated underwriting system, Desktop Underwriter. Why is Fannie Mae doing this, and does Fannie Mae still recommend the use of credit scores? Fannie Mae is modifying the way in which its automated underwriting system, Desktop Underwriter, analyzes credit risk by substituting the use of credit characteristics from credit reports for FICO scores. Even though FICO scores remain a valuable tool for assessing credit risk, they are proprietary. Therefore, Fannie Mae is unable to precisely disclose the components of the score. The Fannie Mae "Mortgage Consumer Bill of Rights" states that consumers have the right to know what is behind a lender's mortgage decision, to see all of the factors that go into a lender's determination of their creditworthiness. By using credit characteristics in place of FICO scores in its automated underwriting system, Fannie Mae can honor this commitment by providing more information about Desktop Underwriter and the components of its risk assessment. Fannie Mae in no way wants to impact its customers' reliance on FICO scores for uses outside of the credit risk analysis component of Desktop Underwriter. Fannie Mae will continue to recommend that lenders use FICO scores in their manual underwriting process. Credit scoring helps identify more qualified borrowers, at all income levels -- but it should never be the sole factor considered when a loan application is evaluated. A borrower's credit history accounts for a small piece of the underwriting decision, and a lender's personal evaluation of a borrower's credit history, including any extenuating circumstances, is paramount." So why can't Doug get a FNMA loan?
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| | Saturday, February 24, 2001 - 02:14 pm "-- but it should never be the sole factor considered..." Yeah, SHOULD all over itself. This is rarely the PRACTICE, however. Fair Isaac tripe also says: [my comments in square[]brackets] Fallacy [Fact]: My score determines whether or not I get credit. [Absolutely, positively] Fact [Fallacy]: Lenders use a number of facts [yeah right] to make credit decisions, including [and only] your FICO score. Lenders look at information such as the amount of debt you can reasonably handle given your income [your FICO debt-to-limit ratios], your employment history [which is on the bureau reports MOST of the time inaccurate], and your credit history [which is the meat of FICO duh!]. Based on their perception of this information [looking at computer terminal screen duh!], as well as their specific underwriting policies [follow FICO cutoffs strictly], lenders may extend credit to you although your score is low [at 23.9% if you're LUCKY], or decline your request for credit although your score is high [and then you woke up]. Right, and the car company is going to reject a 770 from the college grad burger-flipper who lives with his parents!
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| | Saturday, February 24, 2001 - 07:49 pm It's interesting though that FNMA seems to be moving away from the Fair Isaac scores. I couldn't even find ANY guidelines. I have heard MANY times lenders state that FNMA has the minimum score requirements. If that's no longer true, we need to know. Also, I searched FHLMC too and found ONE link, to the credit scoring FAQ and that got me a "not found." From the article above: "Fannie Mae is modifying the way in which its automated underwriting system, Desktop Underwriter, analyzes credit risk by substituting the use of credit characteristics from credit reports for FICO scores. Even though FICO scores remain a valuable tool for assessing credit risk, they are proprietary. Therefore, Fannie Mae is unable to precisely disclose the components of the score. The Fannie Mae "Mortgage Consumer Bill of Rights" states that consumers have the right to know what is behind a lender's mortgage decision, to see all of the factors that go into a lender's determination of their creditworthiness. By using credit characteristics in place of FICO scores in its automated underwriting system, Fannie Mae can honor this commitment by providing more information about Desktop Underwriter and the components of its risk assessment." I'd like to know what exactly those "credit characteristics in place of FICO scores" will be. For the record, I'm not a big fan of FNMA. In 1997 they foreclosed on and then evicted a single mom and her girl out of their home. I personally reviewed every mortgage payment ORIGINAL money order receipt, and I reviewed the Nations Bank accounting with the MISSING payments, resulting in the foreclosure. I dealt with the FNMA legal department and faxed the Superior Court judge what I thought of his ruling in favor of FNMA. Coincidentally, the FNMA lawyers went to law school with him. Life's a bitch when you're broke and homeless after FNMA evicted you and had your furniture and child's toys taken to the dump, while your $10K lawyer can't add. I just had to mention this. FNMA is a publicly traded company and has no affiliation with the government. Anyway, I'd like to know what those "credit characteristics in place of FICO scores" are ASAP.
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| | Sunday, February 25, 2001 - 07:30 am Fannie Mae is a GSA. It's a federal corporation. Most corporations are located in a state, with Nevada and Delaware being the most common because of their preferential tax treatment. However Fannie Mae, as a federal corporation, is exempt from all local and state taxes wherever it chooses to reside. Fannie Mae's main objection to FICO scores are that they predict the chance that a person will have a serious delinquency on any account within the next 24 months. Fannie Mae wants a scoring model that predicts only mortgage delinquencies, because they feel it will be more accurate for their purposes.
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| | Sunday, February 25, 2001 - 11:43 am Where do you get that info? "The Fannie Mae "Mortgage Consumer Bill of Rights" states that consumers have the right to know what is behind a lender's mortgage decision, to see all of the factors that go into a lender's determination of their creditworthiness." So that's all bull? Why can't I find anything on their credit requirements?
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| | Sunday, February 25, 2001 - 12:57 pm Yeah! I can't remember reading that anywhere...
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| | Sunday, February 25, 2001 - 03:46 pm I looked on the Fannie Mae website, but didn't see a search funcion. Guidelines direct: http://www.fanniemae.com/singlefamily/products/markets/emg_flex_97.html Fannie Mae research, indirect: http://www.thewarrengroup.com/home/wp/njbt/njbtwinter1998/131231199800005.htm "...the correlation between credit scores and performance is also significant: a borrower with a credit score below 620 is 2.5 times more likely to default than someone with a credit score of 660 to 699, according to Fannie Mae." http://www.naca.com/campaigns/?put=fannie.html ************************************************* Now for the meat of the discussion: http://www.snl.com/financial_svc/20000807sl.html "We have moved away from using the FICO score to using the credit characteristics directly out of the credit report," said Pamela S. Johnson, Fannie Mae’s vice president for single-family mortgage business, who was responsible for the new version of DU. "We’re attempting to measure the likelihood that borrowers will become delinquent on their mortgages," not necessarily their overall creditworthiness, she added. Using their own credit risk assessment model (rather than FICO, the scoring provided by Fair, Isaac & Co.) will allow Fannie Mae to take into account mortgage-industry specific factors that do not appear in a FICO score. Such factors might include loan-to-value level, a consumer’s reserves, the type of property in question, and other factors inherent in traditional mortgage underwriting that are not addressed in FICO scoring. ************************************************* So you tell me, is Fannie Mae changing away from FICO because they want more accuracy and, therefore, more profit? Or is Fannie Mae switching off of FICO scores because they just CARE SO MUCH about consumers and FEEL that EVERY CONSUMER has the RIGHT TO KNOW?
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| | Sunday, February 25, 2001 - 10:54 pm Looks like it's just more FNMA propaganda. Much appreciate those links. http://www.fanniemae.com/singlefamily/products/markets/emg_flex_97.html "As a result, in some situations, borrowers with credit scores below the 660 threshold used in our experiment will receive an approval recommendation -- and so will some borrowers with less than two months' reserves. On the other hand, some borrowers with fewer compensating factors will need scores over 660, in fact greater than 680, to receive an approval recommendation." From: http://www.thewarrengroup.com/home/wp/njbt/njbtwinter1998/131231199800005.htm "With the FICO scores, there's no bias and every borrower is treated equally." That's not true, as people who know how scores are derived (i.e. avoid inquiries, etc. etc.) get higher scores. http://www.naca.com/campaigns/?put=fannie.html I posted about the NACA mortgage program at NACA: NO Downpayment - NO Closing Costs - NO perfect credit - 6.50% 30-year fixed (as of 02/21/ 01) Bruce Marks certainly is different, and so is his loan program. Very interesting. http://www.snl.com/financial_svc/20000807sl.html July 31, 2000 edition of Specialty Lender Weekly: "Fannie Finesses Credit Scoring Fannie Mae announced July 18 that its new version of automated underwriting system Desktop Underwriter will not rely solely on credit scoring information, or FICO scores, in determining whether an applicant will receive a mortgage. "We have moved away from using the FICO score to using the credit characteristics directly out of the credit report," said Pamela S. Johnson, Fannie Mae’s vice president for single-family mortgage business, who was responsible for the new version of DU. "We’re attempting to measure the likelihood that borrowers will become delinquent on their mortgages," not necessarily their overall creditworthiness, she added. ... Although FM Watch has not issued any comment on the new DU -- perhaps awaiting the product release date of July 31 -- it is likely to do so, since by Johnson’s own admission, the program will allow lenders to find more conforming borrowers from the pool of loan applicants. ..." What year are we talking about? So many of the people reading here want to buy a house, it would be really good to know what the credit requirements are.
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