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

Reblogger Gita Bantwal
Real Estate Agent with RE/MAX Centre Realtors

Attention Home Buyers! Read this post if you are getting a mortgage.

 

 

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
 
 

  

 Twitter Account of Gene Mundt, Mortgage Lender   LinkedIn Account of Gene Mundt, Mortgage Lender   Facebook Acct. of Gene Mundt, Mortgage Lender   Pinterest Acct. of Gene Mundt, Mortgage Lender   

   Gene's Chicagoland Blog/Gene Mundt, Mortgage Lender  

    

 

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! 

 

Email Me .. to be added to my Mortgage & Real Estate Newsletter

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Topic:
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Location:
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Show All Comments
Rainmaker
3,888,849
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Gita. Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi is an excellent source for those in his service area. Thanks for the reblog! Enjoy your day!

Oct 30, 2018 04:15 AM #1
Rainmaker
4,799,256
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

This is an excellent post with lots of good information and a great choice for a re-blog.

Oct 30, 2018 04:19 AM #2
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Wayne, I agree. 

Oct 30, 2018 04:30 AM #3
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Gabe, thank you 

Oct 30, 2018 04:30 AM #4
Rainmaker
3,332,846
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

Great information and surprising innovation from our Fed Friends !

Oct 30, 2018 04:33 AM #5
Rainmaker
2,379,288
Anita Clark
Coldwell Banker Access Realty ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

This article is chock full of great consumer information. A very good re-blog choice, Gita. Have a wonderful day!

Oct 30, 2018 04:36 AM #6
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Sally, thank you 

Oct 30, 2018 04:54 AM #7
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Anita, have a good day.

Oct 30, 2018 04:54 AM #8
Rainmaker
4,087,759
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Gita Bantwal,

What a great post to re-blog of Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi . How did I miss this one?? Off to read and comment on it.

Oct 30, 2018 05:37 AM #9
Rainmaker
4,599,783
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Gita, great choice for a reblog, and Gene always provides us with useful information.

Oct 30, 2018 06:02 AM #10
Rainmaker
1,492,393
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Lots of great information for those seeking loans who may be an authorized user.

Oct 30, 2018 06:46 AM #11
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Dorie, thank you for reading.

Oct 30, 2018 08:35 AM #12
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Joan, thank you.

Oct 30, 2018 08:35 AM #13
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Sheri, thank you.

Oct 30, 2018 08:35 AM #14
Rainmaker
1,289,786
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Greatly appreciate your sharing this info with your readers, Gita Bantwal ... thanks so much!

Like the newer pic too ... very friendly and relaxed.  Get great vibes from it ...

Gene

Oct 31, 2018 01:03 PM #15
Rainmaker
4,433,283
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Gene, thank you for the comment.

Nov 01, 2018 03:35 AM #16
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Rainmaker
4,433,283

Gita Bantwal

REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
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