New Freddie Mac Guidelines Regarding Credit History, Authorized Users and Mortgage Approval

By
Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
https://activerain.com/droplet/5fx4

 

 

New Freddie Mac Guidelines Regarding Credit History,

Authorized Users and Mortgage Approval

 

Recently, Freddie Mac updated their underwriting guidelines, via its "Bulletin" from September 19, 2018 ...

 

One of the key points documented in this Freddie Mac Bulletin related to Credit Reporting and specifically ... "AUTHORIZED User Accounts".  

 

 

Before proceeding further, it's important to know the definition and role of an Authorized User, as per the 3 major Credit Bureaus.

 

An "Authorized User" (as defined by Equifax) is:

 

In a nutshell, being an authorized credit card user means someone has authorized you to use their credit card account. If you’re added to a credit card account as an authorized user, you will receive a credit card in your name, linked to the primary account owner’s account, and you will be considered a secondary account holder.
 
While authorized users are considered account holders, they are not responsible for ensuring financial obligations to the credit card company are satisfied – meaning they don’t generally receive the account statement and aren’t legally responsible for paying the amounts due. That is the responsibility of the primary account holder. The primary account holder also receives the credit card statement.
 
For further info from Equifax regarding Authorized Users, click HERE.
 
In the world of credit reporting, it's come to light that some Borrowers are trying to enhance their own personal credit history by "jumping on" another person's (typically a spouse's or parents') credit line as an "Authorized User".
 
This action is commonly referred to as "Tradeline Rental".  This Tradeline Rental is initiated/orchestrated by Credit Repair Companies ... and some Mortgage Originators ... in an attempt to boost credit scores for individuals/mortgage applicants.
 
Freddie Mac (Conventional Loans) has now issued a more restrictive and specific update on HOW a Lender's Underwriters must view these types of ratings on an applicant's Credit Report. 
 
Depending on the results of the Automated Underwriting findings ... a Lender's Underwriter may now require that a Borrower/Applicant meet the following criteria/conditions listed below.    
 
Note:  The end goal is to allow Lender's Underwriters to consider and determine whether the usage of an "Authorized User Account" should be factored in an Applicant's overall Credit Analysis.
 
Freddie Mac has determined that the following requirements must be gathered, evidenced, and documented by the Lender for each Authorized User Account:
  
  • Another Borrower on the Mortgage owns the Tradeline in question, or ...
  • The Tradeline is owned by the Borrower's Spouse, or ...
  • The Borrower has been making the payments on the Account for the last 12months, or ...

 

Should none of the above apply, then: 

  • If the Lender's Underwriter is unable to document one of the above requirements for each Authorized User Account, the Lender may make the determination that the Authorized User Accounts have an insignificant impact on the Borrower's overall Credit History and the information on the Credit Report is representative of the Borrower's own credit reputation
  • The Lender's Underwriter should base its determination on the number of the Borrower's own Tradelines ... as well as their Age, Type, Size, and the Payment History, as compared to the Authorized User Accounts
  • The Lender's Underwriter must document its determination in the Mortgage file 
 
This change offers an opportunity for Borrowers as it can and will matter in those cases where the Borrower has a limited Credit History or needs another "tradeline" to meet a Lender's/Underwriter's credit requirements.  This new stance by Freddie Mac comes as a result of truly trying to define the "true" credit history of the Borrower. 
 
In the case where the Borrower has a limited amount of credit, and when Private Mortgage Insurance is involved, this policy could be critical to the "allowance" of newly acquired Authorized User Accounts, especially in the attempt to "create" a second or third Tradeline in order to get Approval from a Lender and a Private Mortgage Insurance Company.  

Changes within the industry happen with regularity.  It's always important to choose an LO that remains educated and current ... fully knowledgeable with a proven track record of experience.  

But financing scenarios that include Authorized Users, Tradelines, and PMI especially point out the real need for Borrowers taking ample time to conduct a thorough search for their lender.  In such cases, an LO must possess a thorough understanding of this new Freddie Mac change, as its correct implementation could mean the difference between finding underwriting success or failure.  

In New Lenox, Will County, and throughout the Chicagoland - IL/WI area, please don't hesitate to reach out to me with your mortgage questions or for assistance ...
 
 
 
* When in need of Mortgage info or service when buying,  refinancing, or investing in a home in New Lenox - elsewhere in Chicagoland - IL & WI contact me.
 
I'll be happy to put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

 
Gene Mundt
 
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed
 
American Portfolio Mortgage Corp.
NMLS #175656
 
 
Direct: 815.524.2280
Cell/Text: 708.921.6331
eFax: 815.524.2281
 
 
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

 

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Fred Griffin, on leave of absence from ActiveRain 10/01/2018 04:16 PM
  2. Patricia Feager, MBA, CRS, GRI,MRP 10/01/2018 05:56 PM
  3. Joyce Marsh 10/02/2018 11:56 PM
  4. Gabe Sanders 10/12/2018 11:00 PM
  5. Gita Bantwal 10/30/2018 04:00 AM
Topic:
Lending / Financial
Location:
Illinois Will County New Lenox
Groups:
Realtors®
Mortgages
Chicago Area Real Estate BUZZ!
Buyer Information - What Buyers Need to Know in Today's Market
Bananatude
Tags:
credit
mortgages
underwriting
credit history
freddie mac
underwriting guidelines
homebuying
authorized users
underwriting changes

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Rainmaker
2,035,914
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Fort Worth, TX
Selling Homes Changing Lives

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - It is critical to get this information out to consumers and realtors too. I am so glad it was featured! 

Thank you!

Oct 01, 2018 05:55 PM #4
Rainmaker
3,828,538
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ,

A real eye opener! You are right changes happen regularly within the industry and you have to work with those who keep up educating themselves on all the important information! Congrats on the well deserved featured post!

Oct 01, 2018 06:55 PM #5
Rainmaker
4,797,386
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks for the info, Gene.  I think this makes sense for the lenders to protect themselves.

Oct 02, 2018 04:56 AM #6
Rainmaker
3,126,813
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

What great information, Gene... as Dorie Dillard CRS GRI ABR said... a real eye-opener. I had no idea until now about authorized credit usage... in fact, had never given this one minute's worth of thought. 

Oct 02, 2018 04:57 AM #7
Rainmaker
1,501,649
Beth Atalay
Cam Realty and Property Management - Clermont, FL
Cam Realty of Clermont FL

Good morning Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, this is great information, I will mark it for future read/use and share as well.


 

Oct 02, 2018 05:13 AM #8
Rainer
40,868
Leslie Currle
Alcova Mortgage LLC - Luray, VA
With you, every step of the way

Great post, Gene.  Thanks for sharing.

Oct 02, 2018 06:24 AM #9
Rainmaker
2,463,314
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

I thought Freddie Mac was a person when first entering into Real Estate and wondered why he was so famous. When I found out otherwise, unless you do business with this institution it remains one of the LAST on my list to know

Oct 02, 2018 06:50 AM #10
Rainmaker
2,576,490
Brian England
Arizona Focus Realty - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Hmm, my youngest brother has always been an authorized user on one of my cards and one of our Mom's cards, which I figured was the main reason he had such great credit from the get go.  Was I wrong in thinking this?

Oct 02, 2018 07:14 AM #11
Ambassador
4,010,429
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Gene

Thanks for some terrific education. I learned a number of things today! Glad to see this was featured!

Jeff

Oct 02, 2018 07:28 AM #12
Rainmaker
318,430
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA

Thanks for the update Gene.

You always provide timely information.

Oct 02, 2018 10:30 AM #13
Ambassador
1,924,955
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Great update as always Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi  good to know

Oct 02, 2018 10:38 AM #14
Rainmaker
2,035,914
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Fort Worth, TX
Selling Homes Changing Lives

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi - I am curious, does the  "Tradeline Rental" also apply to divorced couples who separate amicably and one can't get a loan on their own? I could see how helpful it could be if children needed to be housed by the other parent who didn't have another significant other could be helpful to keep say mother and children together under the same roof...

Your thoughts?

Oct 02, 2018 12:28 PM #15
Ambassador
2,868,457
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

When my daughter turned 18 I added her as an authorized user on some accounts.  She made purchases and made payments on those accounts (mostly store cards) for a number of years.  It really helped when she began to build her own credit.  All those accounts have been closed now and she's on her own, but I was taught it was the thing to do.... it was a while ago.

Oct 02, 2018 09:23 PM #16
Rainmaker
1,523,097
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Alexandria, VA
Alexandria Virginia Homes For Sale

Gene, had never thought about this before and it's excellent information. Thank you for educating me. I've bookmarked this post to share in the future. Congrats on your feature!

Oct 03, 2018 05:31 AM #17
Rainmaker
5,419,817
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Congratulations on your feature recognition.

Thanks for sharing this important information.

Oct 03, 2018 10:07 AM #18
Rainmaker
1,166,184
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Another informative post, Gene. You certainly know your stuff and your clients are lucky to have you. You know where this is going 

Oct 03, 2018 02:26 PM #19
Rainmaker
1,838,100
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Great explanationation of Tradeline and how under writers will decide on it !

Oct 07, 2018 07:46 AM #21
Rainmaker
3,266,221
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Great information and surprising innovation from our Fed Friends !

Oct 30, 2018 04:34 AM #22
Rainmaker
3,828,538
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ,

I knew when you posted this one it would be featured and so glad to see it was. Gita Bantwal just re-blogged to get more traction! This article is chock full of great consumer information and I'm sure is making your phone ring!

Oct 30, 2018 05:39 AM #23
Rainmaker
630,386
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

As usual a wonderfully smart post! You always teach us something and it is always pertinent spot on information we can actually use!   Thank you!

Oct 30, 2018 11:54 PM #24
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Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

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