February 07, 2022

Bulletin 2022-020 Credit Score Eligibility in Desktop Underwriter (DU) for Multiple Borrowers

Credit Score Eligibility in Desktop Underwriter (DU) for Multiple Borrowers

Newrez Approved Correspondent Clients: effective immediately for all newly locked loans, Newrez will implement Fannie Mae’s Credit Score eligibility update to support homeownership opportunities for more underserved borrowers. This update includes the use of an average median credit score to determine if Fannie Mae’s minimum 620 credit score requirement is met.

 

For most loans with multiple borrowers the average median credit score will be calculated by DU as follows:

  1. DU will determine each borrower’s applicable credit score (middle of three (3) scores or the lower of the two (2) when two scores received).
  2. DU will then average the applicable credit scores for all the borrowers on the loan to determine if the 620 credit score threshold is met.
  3. If the 620 credit score is met, DU will continue to assess the loan.
  4. Newrez will impose a minimum 580 credit score for any borrower on the loan, even if the DU average is above 620.

 

The representative credit score will continue to be used for the following:

  • Pricing on all loans
  • Loan delivery of all loans
  • Minimum Credit Score requirements for
    • DU loans with one borrower
    • Refi Now loans
    • Other policies in DU that have minimum credit score criteria, such as multiple financed properties
    • LPMI products when Newrez purchases the mortgage insurance
    • Any Newrez credit score overlays, such as manufactured housing (minimum 640 credit score)

 

There will be a message in the Observation section of the DU Underwriting Findings report that indicates both the representative credit score and the average median credit score.

 

Below is an example on how the average median credit score will be calculated.

 

 

Step 1: DU will determine each borrower’s applicable credit score

Middle of three (3) scores received or lower of two (2) scores received

Step 2: DU will average the borrowers applicable credit scores to ensure a minimum 620 credit score for DU loans

Score 1

Score 2

Score 3

Borrower 1

590

619

648

Average median credit score is 656

619 + 693 = 1312 ÷ 2 = 656

Borrower 2

661

693

693

Pricing and Mortgage Insurance
  • The representative credit score for the loan in this example is 619 (lower of the two (2) middle scores)
  • Pricing and mortgage insurance will be based on the representative credit score of 619
  • Lender Paid MI where Newrez purchases the mortgage insurance is not available for credit scores less than 620 as the representative and/or the average median score

 

Resources

Fannie Mae Selling Guide Announcement SEL-2021-08