Loan applicants who don’t have a traditional credit scores will soon be able to obtain automated approvals using nontraditional credit.
Up to this point, primary lenders had to manually underwrite Freddie Mac residential loans for borrowers who don’t have credit scores.
But that is about to change, according to an announcement
on Thursday from the McLean, Virginia-based secondary mortgage lender.
For prospective borrowers who have payment references, including records showing timely housing payments, Freddie said it automating the assessment of borrowers without credit scores.
The enhancement goes into effect in June and applies to purchase financing transactions and refinances with no cashout. The loan must be secured by an owner-occupied one-unit property.
The loans will
be evaluated through Loan Product Advisor based on Freddie’s credit requirements. The system provides feedback on the credit risk of each loan.
“By allowing automated assessments, lenders can serve more potential homebuyers more efficiently and with greater certainty that the loan will be purchased by Freddie Mac,” the news release stated.
