Posted On: November 8, 2019

In this week’s blog, we are going to touch on the subjects of the Federal Housing Finance Agency’s (FHFA) published final rules for credit score models and updates to its application for the first time in 20 years.

The new rules published by FHFA became effective in October; these rules will help make it easier for families without any traditional credit history to be approved for a mortgage. 

The National Association of Realtors President, John Smaby, had this to say;

“A borrower’s credit score unlocks mortgage financing through the GSEs, a critical gateway for millions of homebuyers. The credit score currently used by Fannie Mae and Freddie Mac is nearly two decades old, ignoring innovations in modeling and overlooking a wealth of non-traditional information about potential homebuyers.” 

Smaby knew it was time for a change, and this change will help more families get approved for something they’ve long-lived for. 

Now, this is what the process is going to look like for approval on score models:

  • Solicitation of applications from credit score model developers
  • Submission and initial review of submitted applications
  • Credit score assessment
  • Enterprise business assessment

After 20 years, nothing had changed about the Uniform Residential Loan Application (URLA). The URLA is a form used by homebuyers when they are applying for a mortgage. This change also comes after several years of delays. The delays brought more questions and answers. 

Also, the Mortgage Bankers Association’s (MBA) President and CEO Bob Broesmit said the following in a letter to members; “MBA opposed the inclusion of the language preference question in the URLA because of the customer relations issues the question would cause if lenders could not actually serve borrowers in their preferred language, and due to unresolved operational and legal questions raised by the language preference information.” 

But this has some lawmakers worrying about a separate form for language preference and housing counseling information. 

This led to a group of senators giving a statement about the changes; “Voluntary forms are not adequate disclosures. Lenders will be under no obligation to use the new, voluntary form, and it is unclear how many will elect to do so. This will result in disparate treatment among borrowers who use different lenders.”

If you wish to see a more detailed description of each change made, click here

SETCO’s goes beyond excellent title insurance. We will work with all parties in a closing transaction, and we understand that it means something different to each of them. Likewise, we recognize that each person has different requirements, and we’ve designed our services accordingly. 

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