When applying for a home mortgage, the tried and true thing to do was to keep a record of your pay stubs to show your creditworthiness and how financially responsible you were to take on a mortgage, among other things. Recently however, mortgage finance company Fannie Mae announced significant changes that will make the standard process a thing of the past.
Fannie Mae announced on Monday that lenders can now use the employment and income information provided by an Equifax database to verify and determine a borrower’s ability to manage a loan, eschewing the standard process of gathering pay stubs and tax information. This major change should go a long way in making the mortgage process much easier for borrowers as well as lenders.
An important change Fannie Mae also announced is making it easier for lenders to bestow loans to borrowers with little or no credit history. This is critical in helping minorities that don’t have typical credit scores achieve the goal of homeownership.
Fannie Mae is not a lender, it buys loans from lenders and then turns them into securities that provide guarantees for lenders should a loan default. Ever since the real estate and financial crisis a few years ago, lenders have come to rely heavily on lending programs backed by the government, which makes Fannie Mae’s requirements that much more important when vetting borrowers seeking a mortgage loan.