Mortgage

Freddie Mac creates automated option for homebuyers without credit score

This should help expand access to credit

Freddie Mac expanded homeownership opportunities and access to credit Thursday for many Americans who do not have credit scores.

The mortgage giant automated the assessment of borrowers without credit scores if they have payment references, including records showing timely housing payments. Previously, lenders could manually underwrite mortgage loans to borrowers without credit scores.

Now, lenders can use automated assessments, enabling them to serve potential homebuyers more efficiently and with greater certainty that the loan will be purchased by Freddie Mac.

“We're committed to supporting responsible lending and improving access to credit for all borrowers, including first-time home buyers, low- and moderate-income buyers and underserved populations,” said David Lowman, executive vice president of Freddie Mac’s Single-Family Business. “It's important that we keep pace with the evolving needs of the U.S. market and help support sustainable homeownership.”

Borrowers without credit scores will be eligible for purchase mortgages or no-cash-out refinances at one-unit owner-occupied loans starting in June.

Freddie Mac will use its Loan Product Advisor to evaluate loans based on the company’s credit requirements and provide feedback on the credit risk of each loan.

“By allowing lenders to more easily assess their overall underwriting risk, we encourage them to take advantage of our entire credit box to originate more loans in a safe and secure manner,” Lowman said.

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