If you are not sure about the addition of trended data on mortgage credit reports, how it affects you, and how to deal with it, take heart! The reality is that mortgage credit trended data is a shockwave to the industry, and is causing even more changes for mortgage originators who have already been handed their fair share (TRID, anyone?).
We have scoured our mortgage lending services sources to answer some of the biggest, most common questions about trended data information...and what it means for you and your consumers in reaching their goals of home ownership.
Here are some mortgage trended data FAQs to make your life easier. Stop singing the blues, and read on!
What is mortgage trended data?
The definition is "An enhanced credit report with new, valuable data fields, including Actual Payment Amount, and up to 30 months of detailed account history for each tradeline."
Yeah, yeah, so what is the point?
The main goal of trended data is to separate "transactors" from "revolvers" in pursuit of a more predicitve analysis of borrowers. Some consumers use credit but pay it off every month. These people will be designated as "transactors." Others use debt and only make the minimum payment, who will be "revolvers." Trended data information will show originators which designation their borrowers receive. This way, "transactors" can be looked upon more favorably.
Is there a benefit to the consumer?
Yes. The addition of trended data on mortgage credit reports is coming about because Fannie Mae wants a more comprehensive view of borrower's historical payment performance. Consumers with little or short credit histories who have managed their payment history wisely would have previously probably shown up as non-prime. Now, they can benefit from the addition of mortgage trended data on credit reports.
Will every tradeline's trended data be reviewed?
No. Fannie Mae is only going to be reviewing trended data on revolving accounts.
Does trended data have an impact on the credit score?
No. Trended data is for underwriting purposes, and is not figured into the mortgage credit score. The scoring model will remain unchanged.
Are all three bureaus supplying mortgage trended data?
No. Equifax and Transunion ARE adding trended data on their reports, however, Experian is NOT. There is no ETA on when or if Experian will add it to their reports in the future.
Will trended data be available on all tradelines?
Yes, as available. Fannie Mae will only be utilizing trended data from revolving accounts in underwriting decisions. If the creditors do not supply this information, the bureaus won't be adding it to the credit reports.
Can I order a supplement on the trended data information?
Yes, it is possible to supplement this information if needed.
Will loans for borrowers that make only the minimum payment on their credit card each month be able to receive an Approve recommendation from DU?”
Yes. The use of the actual payment information will impact the analysis of the borrower’s credit. However, the actual payment information is used in just one of the credit risk factors analyzed by DU
DU will continue to perform a comprehensive evaluation of all of the credit and non-credit risk factors on the loan to determine the recommendation.
Does the amount a borrower pays on their credit card account actually help predict how they will pay their mortgage?
Yes. Research has shown that borrowers who pay off their credit cards every month are 60% less likely to become delinquent than borrowers who only make the minimum payment. (Source, Fannie Mae).
Do any of the changes made in DU Version 10.0 apply to FHA or VA loan casefiles underwritten through DU?
No. The DU Version 10.0 updates only impact conventional loans, not FHA or VA loans underwritten through DU for Government Loans. Lenders will not see the updated guidelines or messages on their FHA or VA loan casefiles.
What do I need to do to receive the new mortgage credit trended data credit reports?
Nothing. Your credit report provider will handle everything, and you will begin seeing the trended data information on every credit report, if you haven't already.
Hopefully, these mortgage trended data FAQs helped address your concerned and clarified the issue. Trended data information is expected to affect loans September 24, 2016.
Feel free to contact Data Facts with any additional questions that you need addressed.
And hang in there!