Selling Guide

Published November 03, 2021

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B3-5.1-01, General Requirements for Credit Scores (09/01/2021)

Introduction

This topic describes Fannie Mae’s requirements for borrower credit scores, including:

 

Credit Score Versions

Credit scores are required for most mortgage loans purchased or securitized by Fannie Mae. The classic FICO credit score is produced from software developed by Fair Isaac Corporation and is available from the three major credit repositories. Fannie Mae requires the following versions of the classic FICO score for both DU and manually underwritten mortgage loans:

  • Equifax Beacon® 5.0;

  • Experian®/Fair Isaac Risk Model V2SM; and

  • TransUnion FICO® Risk Score, Classic 04.

The lender must request these FICO credit scores for each borrower from each of the three major credit repositories when they order the three in-file merged credit report. If the borrower’s credit file includes complete and accurate information to ensure the validity of the credit score, the lender does not need to further evaluate the borrower’s creditworthiness.

Note: The credit report will indicate if a credit score could not be produced due to insufficient credit. The credit report must be maintained in the mortgage loan file, whether the report includes traditional credit and a credit score or indicates that a credit score could not be produced due to insufficient or frozen credit.

 

Minimum Credit Score Requirements

The following table describes the minimum credit score requirements:

Transaction Type Minimum Credit Score
Manually underwritten loans

The requirements are published in the Eligibility Matrix and are based on the representative credit score for the loan and the highest of the LTV, CLTV, or HCLTV ratios, as applicable. The minimum representative credit score that applies to eligibility and pricing of the loan:

 

620 — fixed-rate loans

 

640 — ARMs

DU loan casefiles

The minimum credit score that applies to eligibility of the loan casefiles is:

 

620 — fixed-rate loans and ARMs

 

For loan casefiles with one borrower, DU will use the representative credit score to determine whether the minimum 620 credit score requirement is met.

 

For loan casefiles with more than one borrower, DU will determine whether the minimum credit score requirement is met using:

 

  • The representative credit score for RefiNow loans and loans that have a minimum credit score other than 620 (such as multiple financed properties); or 
  • An average median credit score. See DU Credit Score requirements below for details on how DU will calculate the average median credit score.

 

In instances where DU uses the average median credit score for the eligibility assessment, the representative credit score must still be provided at time of delivery. This may result in the delivery of loans with representative credit scores less than 620.

 

Mortgage loans insured or guaranteed by a federal government agency (HUD, FHA, VA, and RD) The minimum representative credit score is 620
Loans delivered pursuant to any variance contained in the Lender Contract

Manually underwritten loans: Higher of 620 representative credit score or the minimum representative credit score required by the variance

 

DU loan casefiles: Higher of 620 based on score used by DU or the minimum representative score required by the variance

See  B3-5.1-02, Determining the Representative Credit Score for a Mortgage Loan for additional information.

 

Exceptions to the Minimum Credit Score Requirement

Certain transactions are not subject to the minimum credit score requirement, including:

  • loans where no borrower has a credit score (see Section B3–5.4, Nontraditional Credit History);

  • manually underwritten HomeReady mortgage loans that include a borrower with a low credit score (see B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements); and

  • high LTV refinance loans, except for those loans underwritten using the Alternative Qualification Path.

 

DU Credit Score Requirements

Credit scores are not an integral part of DU's risk assessment because DU performs its own analysis of the credit report data. However, lenders must request credit scores for each borrower from each of the three credit repositories when they order the three in-file merged credit report, described in B3-5.2-01, Requirements for Credit Reports. If one or two of the credit repositories do not contain any credit information for the borrowers who have traditional credit, the credit report is still acceptable as long as

  • credit data is available from one repository,

  • a credit score is obtained from that repository, and

  • the lender requested a three in-file merged report.

Note: When a loan casefile is submitted to DU for a borrower with a credit score, but only medical tradelines are reported on the credit report, the loan casefile will receive an Out of Scope recommendation. The lender can manually underwrite the loan casefile in accordance with the Selling Guide.

If the transaction does not meet the above requirements, refer to Section B3–5.4, Nontraditional Credit History, for underwriting and eligibility requirements for DU loans in which one or more borrowers do not have a credit score.

Calculating the Average Median Credit Score 

For certain casefiles, DU will use an average median credit score in place of the representative credit score to determine whether the minimum credit score requirement is met.

The following examples demonstrate how DU will calculate the average median credit score that applies to the minimum credit score requirement above.

Borrowers on the Loan Application Step 1:  Determine each borrower's median score Step 2: Average the median scores to determine casefile score
Borrower Scores: 590, 605, 648

Average:  Not applicable

Representative credit score: 605

Borrower 1

 

Borrower 2

Scores: 590, 605, 648 Median: 605

 

Scores: 661, 693, 693 Median: 693

Average: (605 + 693)/2 = 649

 

Representative credit score = 605

Borrower 1

 

Borrower 2

Scores: 590, 605 Median: 590

 

Scores: 661, 693, 693 Median: 693

Average: (590 + 693)/2 = 642

 

Representative credit score: 590

Frozen Credit Requirements

If the borrower’s credit information is frozen at one of the credit repositories for borrowers who have traditional credit, the credit report is still acceptable as long as

  • credit data is available from two repositories,

  • a credit score is obtained from at least one of those two repositories, and

  • the lender requested a three in-file merged report.

Loans for borrowers with credit data frozen at two or more of the credit repositories will not be eligible whether underwritten manually or in DU.

 

Loan-Level Price Adjustments Based on Credit Score

Loan-level price adjustments (LLPAs) are assessed based on the “representative” credit score for the loan, in addition to other eligibility and loan features. See the Loan-Level Price Adjustment (LLPA) Matrix for additional information about LLPAs, including information about how LLPAs are assessed for loans that include borrowers without a credit score.

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2021-08 September 01, 2021
Announcement SEL-2020-04 August 05, 2020
Announcement SEL-2019-07 August 07, 2019
Announcement SEL-2018-09 December 04, 2018
Announcement SEL-2017-10 December 19, 2017
Announcement SEL-2016–07 August 30, 2016
Announcement SEL-2015–02 February 24, 2015
Announcement SEL-2013–06 August 20, 2013
Announcement SEL-2012-13 November 13, 2012
Announcement SEL-2012–07 August 21, 2012
Announcement SEL-2012–06 June 26, 2012
Announcement SEL-2011–13 December 20, 2011
Announcement SEL-2011–12 November 15, 2011
Announcement SEL-2010–06 April 30, 2010
Announcement 09-37 December 30, 2009
Announcement 09-32 October 30, 2009
Announcement 09-29 September 22, 2009
Announcement 09-08R June 8, 2009
Announcement 09-12 May 4, 2009
Announcement 09-04 March 4, 2009

 

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