Freddie Mac to include bank account data as part of underwriting

DDA Mortgage • October 19, 2022


Freddie Mac today announced it will include a review of borrowers’ bank account data to identify a history of positive monthly cash-flow activity as part of its loan purchase eligibility assessments, according to a release shared with HousingWire.


The organization says this move is intended to increase homeownership opportunities, and will be available to mortgage lenders through its automated underwriting system Loan Product Advisor (LPA), beginning on Nov. 6.


Freddie Mac says the review, after borrowers give permission, will enable lenders and brokers to identify 12 or more months of cash-flow activity for inclusion in the tool’s risk assessment, and can only positively affect a borrower’s credit risk assessment


The data will be obtained from checking, savings and investment accounts, including those used for direct deposit of income and monthly bill payments, such as rent, utilities and auto loans.


This financial account data can also be obtained from designated third-party service providers using the same automated processes they use to verify assets, income, employment, and on-time rent payments via LPA’s asset and income modeler (AIM).


In order to identify opportunities, the LPA platform will notify lenders in cases where submitting additional account data could benefit the borrower in question, according to Freddie Mac.

“Working alongside our industry partners, we have made significant progress toward modernizing the mortgage origination process,” stated Kevin Kauffman, Freddie Mac Single-Family vice president of client engagement.


“In the current market, our latest industry-leading innovation delivers lender efficiencies that can lead to cost savings and improvements to the borrower experience, while meeting Freddie Mac’s strong credit underwriting standards,” Kauffman said.


This announcement comes just months after Freddie started incorporating on-time rent payments as part of its underwriting platform.


Both additions highlight ongoing momentum in the industry to increase access to homeownership via alternative credit data. There could be significant benefits for underbanked individuals and people of color, due to existing risk assessment’s failure to serve those with “low-or-no” FICO credit scores.

The new assessment inclusions also follow Freddie Mac’s initiative to help renters build credit by encouraging multifamily operators to report on-time rental payments to the three major credit-reporting bureaus (via partnership with Esusu).


The organization says that since launching the initiative in November 2021, more than 70,000 households across more than 816 multifamily properties have been enrolled and over 15,000 new credit scores have been established. It also notes that 67% of renters with an existing credit score saw scores increases.



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