Did Fannie Mae Just Leak that they will Stop Using FICO®?
How you handle disputed accounts has just changed because of Fannie Mae’s new update to their Desktop Underwriter 10.1.
Previously borrowers were always required to resolve any dispute that was on a consumer’s credit report prior to closing a loan with Fannie or Freddie. The reason behind that was when accounts are in a “disputed status” they are removed from the FICO ® credit scoring model.
What Fannie has announced with this new version of their desktop underwriter is the consumer is longer required to remove the disputes they attempt to underwrite the file including all of the disputed information. If DU can’t automatically underwrite and approve the loan the consumer will be required to resolve the dispute.
Initially, the application will come through desktop underwriter with the open active disputes included in the evaluation and then make the underwriting decision. What I find interesting about this is the FICO® scoring model does not include disputed accounts. Fannie Mae is essentially taking a step back from credit scores and relying on the raw credit data which is probably a good thing.
I find it interesting because Fannie is moving away from relying on credit scores as much as they did in the past. When DU started using trended credit data they took a step back from FICO because they didn’t update the FICO scoring model at that time.
Fannie is still on FICO05, not FICO9. FICO9 is the version that includes trended credit data but Fannie Mae included the trended credit data without changing the scoring model. With this latest move, Fannie is taking another step away from FICO or any scoring model to make their determination on credit worthiness. As Fannie steps further and further away from FICO. I think they’re going to come to a point where it doesn’t really matter what score they use or if they have a score at all because of their internal scoring model they created based on things like trended credit data and underwriting with the disputed accounts included.
I think there will come a day where Fannie and Freddie will no longer require FICO scores for sure or maybe no credit score at all. I think they’ll accept more than just FICO, maybe Vantage Score they’ve been working a long time to get in and with Fannie and Freddie in the mortgage industry Vantage, as you know, Vantage score is the company that was created by the three major repositories to compete with FICO.
Interesting news that drops at the end of the month July 29th, 2017 DU10.1 will go into effect. Consumers as longer required to resolve the disputes prior to an attempt at automated underwriting. I would still recommend that consumers are thinking about getting a mortgage they should resolve all disputes. Removing the dispute quickly can be a nightmare. It is best to get all disputed accounts resolved prior to applying for a mortgage.
There was a small line in this announcement that says that medical debt disputes are not included when being underwritten by Fannie Mae. There’s another clue that Fannie is not including the medical disputed accounts in the underwriting decision. That is another difference from FICO. If it was an open active account FICO would include it. Another move away from scoring models per se as the desktop underwriter has created their own scoring model. I find it very interesting now if you want more information about how to resolve disputes or if you’re looking for six steps to a better credit score go to www.getloanready.com that way you can go online it’s free right now you can get all of the worksheets.