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Big Credit Changes Starting July 1, 2017

Great news for homebuyers! Starting on July 1, 2017, it just might get easier to get approved for a mortgage due to the credit bureaus suppressing a lot of public records, such as lien’s and judgments from the credit report. They are estimating that this will help 8.9% consumer reports, or 19.5 million users.

How is this happening? For a creditor to place a public record against someone, they will need the persons name, address, birthday, and social security number. Most of the time, lien and judgments do not have the social security number, which means in the future, mean judgments, liens, and bankruptcies might not show on the credit report if there are any discrepancies in information used to identify a person.  According to CIC credit, “These additional items will not show up on the credit report unless”:

·   Medical records have completed a 180-day waiting period to ensure all payments have been made and all insurance credits have been accounted for.

·   There is consistency among the bureaus with regard to how an item is reported

·   All authorized users reported by data furnishes have a date of birth included on the reporting

·   All item’s reported, like a traffic ticket, does not include an agreement to pay. These items will no be included.”

Many ask, why are these changes happening? According to the CFPB, the biggest consumer complaint is the inaccuracies on a persons credit report. There has been on FICO to make changes, therefore, they will now be putting the burden of proof on the creditors. The changes being made are not meant to hurt the creditors, but to make sure they are reporting accurate information.

-MTM

Changes are always happening in the mortgage industry! According to Fannie Mae, the changes “will help lenders serve their borrowers with simpler, more certain underwriting guidelines and fewer manual processes.” Here is what is coming down the pipe:

• Debt to Income simplification – The maximum allowable debt to income will be changed to 50%. Previously compensating factors were needed to go above 45%, but this is no longer.
• ARM enhancements – Currently the maximum allowable loan-to-value (LTV) is set at 90% for a purchase transaction on a primary and secondary residence, 75% on a purchase of a 2 unit primary residence, cash-out refinance on a 1 unit, purchase of a 1 unit investment property. The new guidelines will be set to match the fixed rate guidelines up to 95% LTV.
• Disputed tradelines – The update to the Fannie Mae system will assess the risk of using any disputed tradelines and lenders will no longer be required to investigate the disputed tradeline if the loan casefile gets an Approve recommendation.
• Simpler self-employed borrower documentation requirements – Fannie Mae will soon simplify the tax return documentation requirements for many self-employed borrowers. The number of Fannie Mae loans eligible for the one year (instead of two years) of personal business tax return documentation requirements will increase.