It seems that there has been some confusion lately regarding the changes in policy on credit report life cycles and which of the credit score models are accepted by Fannie Mae and Freddie Mac. Many credit reporting agencies are getting questioned on these issues lately, so let’s look at each one.
In June, Fannie Mae (Announcement 09-19 of the Selling Guide) reduced the life cycle of mortgage credit reports by 30 and 60 days, pending the type of loan. For mortgage products on existing homes, the life cycle of the credit report was reduced from 120 days to 90 days from the date the report was issued.
For mortgage products on new home construction, the life cycle of the credit report was reduced from 180 days to 120 days from the date the report was issued. Please note that both of these date reductions include all types of credit documentation, not just the credit report. Employment, asset and income verification documents also have the same life cycles, depending on the type of home being financed.
More information on this new Fannie Mae policy can be found online by clicking here.
I have not heard of any changes in the Freddie Mac credit document life cycles at this time; however, since so many policies in the industry are changing, it may be best to adopt the same timelines.
Credit reporting agencies
On the approved scoring models, many credit reporting agencies are being requested to provide some of the older, or not yet approved, credit scoring models. This can create issues if the credit report is sent to either one of the government-sponsored enterprises (GSEs) as the Web sites of Fannie Mae and Freddie Mac clearly designate which credit scoring models mortgage originators should use. The only credit score models for GSE loan underwriting are currently the same at both agencies and are as follows:
► Equifax Beacon 5.0
► TransUnion FICO Risk Score 04
► Experian/Fair Isaac Risk Model V2
More information on this can be found on the Fannie Mae Web site by clicking here, or for more information directly on this issue from Freddie Mac, click here.
There are bound to be more changes ahead as the mortgage industry works through the problems of the past, stay tuned to your lender notices and GSE updates to stay compliant.
Terry W. Clemans is the executive director of the National Credit Reporting Association Inc. (NCRA). He may be reached at (630) 539-1525.