Fannie Mae Announces Innovations for Lenders, Borrowers

Callie Dosberg

202-752-3117

WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced a series of innovations to bring more certainty and simplicity to lenders, employ stronger data capabilities, and help borrowers have access to sustainable mortgage credit.  In addition, Fannie Mae previously announced plans to reduce lenders’ costs and enhance the company’s technology platform, including new capabilities for the EarlyCheck^™ loan quality system and a new loan delivery tool. Fannie Mae will continue to build new tools and improve existing offerings to serve the needs of lenders and help build a more sustainable housing finance system.

“Fannie Mae wants to be the partner of choice for lenders,” said Timothy J. Mayopoulos, President and Chief Executive Officer, Fannie Mae. “Our aim is to help lenders serve their customers efficiently so that more qualified borrowers have access to mortgage credit. We are enhancing our offerings, improving our tools and innovating through the technology we provide to our customers. Our goal is to make sustainable homeownership a reality in communities across the country while reducing risk for taxpayers.”

Today, the company announced the following innovations:

• Trended credit data – In mid-2016, Fannie Mae will require lenders to use trended credit data when underwriting single-family borrowers through Desktop Underwriter^®. This data will be provided by Equifax and TransUnion, and allows a smarter, more thorough analysis of the borrower’s credit history. Currently, credit reports used in mortgage lending only indicate the outstanding balance and if a borrower has been on time or delinquent on existing credit accounts such as credit cards, mortgages or student loans.  With trended credit data, lenders will have access to the monthly payment amounts that a consumer has made on these accounts over time.  Among other benefits, this will allow lenders to determine if the borrower tends to pay off revolving credit lines such as credit cards each month, or if the borrower tends to carry a balance from month-to-month while making minimum or other payments.  Desktop Underwriter will be updated to utilize this trended credit data, and Fannie Mae will provide additional guidance to lenders in the coming months.

• Nontraditional credit history in Desktop Underwriter – Fannie Mae is building a new capability through its industry-leading Desktop Underwriter automated underwriting system to help lenders more efficiently serve borrowers who do not have a traditional credit history. Currently, Fannie Mae requires lenders to use a manual process to underwrite loans made to these borrowers. With the simplicity and additional certainty that Desktop Underwriter provides to lenders, more borrowers will have access to affordable, sustainable mortgage credit. Fannie Mae will provide guidance to lenders about this new capability in the coming months, and anticipates that the new functionality will be available in 2016.

• New Fannie Mae Connect^™ self-service reporting and data analytics portal for customers and business partners – Fannie Mae will offer Fannie Mae Connect, a new tool to streamline and improve the data available to our customers and business partners, beginning later this year.  Fannie Mae Connect will be a one stop source for users to access data and analytics they need with a single sign-on, replacing multiple legacy systems.  This new tool will provide greater efficiency and simplicity for Fannie Mae customers and business partners.  Users can customize their access and reporting categories, receive email notifications of new reports, and provide feedback to Fannie Mae via an online comment box.  A beta version of Fannie Mae Connect is currently being tested, and the full system with new reports will be available in November. Fannie Mae will continue to improve and expand Fannie Mae Connect with new functionality, additional data and reports, and enhanced features over time.

• Data validation available in Desktop Underwriter – In 2016, Fannie Mae will offer data validation services to help lenders originate loans with greater simplicity and certainty.  Instead of requiring a borrower to provide copies of pay stubs or other documents to verify income, lenders will be able to validate income through Desktop Underwriter with data provided by Equifax’s The Work Number^® (TWN). In addition to efficiency for borrowers and lenders, this could reduce the frequency of mortgage fraud.  Going forward, Fannie Mae will determine if validation services can be offered for additional borrower data, such as bank statements, and additional income documents, such as tax returns.

Earlier this year, Fannie Mae’s suite of risk management tools was integrated to help lenders underwrite and deliver quality loans with greater certainty and transparency:

• Desktop Underwriter – Desktop Underwriter provides lenders a comprehensive credit risk assessment that determines whether a loan meets Fannie Mae’s eligibility requirements.  Over 1,800 lenders use Desktop Underwriter in their underwriting process.  Desktop Underwriter was the first automated underwriting system to be used across the industry and remains the leading tool in the market.

• Collateral Underwriter^™ – Collateral Underwriter continues to provide great value to our customers by supporting a more effective and efficient appraisal review process. Lenders benefit from greater transparency and certainty on loans delivered to Fannie Mae by having access to the same appraisal data and analytics used in our own quality control processes. Since launch in January, more than 1,300 lenders have registered for Collateral Underwriter and over 500,000 appraisals have been reviewed in the tool’s web application.

• EarlyCheck – Over 650 lenders are actively using EarlyCheck to evaluate loan eligibility and data quality prior to delivering mortgages to Fannie Mae. Nearly 60% of loans delivered to Fannie Mae in the second quarter of 2015 came through an EarlyCheck review first.

In addition to today’s announcement, Fannie Mae continues to work to transfer credit risk, reducing the potential for losses and bringing private capital into the market.  By the end of 2015, Fannie Mae anticipates it will have transferred a portion of the credit risk on approximately half a trillion dollars in single-family mortgages. In addition, Fannie Mae is testing a variety of credit risk transfer mechanisms, completing a series of transactions with reinsurers and building the first actual-loss transaction under its Connecticut Avenue Securities series.

“Increasingly we are transitioning from a credit risk storage company, to a holder and mover of a portion of that risk,” Mayopoulos said.