The week in lending: good news in the housing market and new tools from Fannie Mae

The October report from the Housing Market Index, a monthly survey of members belonging to the National Association of Home Builders (NAHB) that is designed to measure sentiment for the U.S. single-family housing market, reported a jump in positive sentiment from U.S. homebuilders. The national index reached 64 in October, up 3 points from September and 10 points from this time last yearany score above 50 is considered a positive sentiment. The Housing Market Index has shown steady growth over the past year and is approaching highs not seen since 2006, before the recession.


Overall, this bodes well for wholesale mortgage lenders. Builder confidence in the 60s indicates a strengthening housing market, and sales expectations are forecast to continue growing in the next six months. This national trend is reflected in regional housing markets, with the greatest gains in the western U.S. Increased sales suggest a bright outlook for the housing market, and for wholesale lenders involved in home sales. The NAHB report implies that the housing market is finally beginning to approach pre-recession levels throughout the country for the first time since mid-2006.


In addition to the positive news from the NAHB, Fannie Mae also announced a number of tools this week that will debut in January 2016. The tools are designed to bring “certainty and simplicity” to mortgage lenders, and make housing finance more sustainable. The new initiatives were created specifically to better serve the needs of lenders.


The first initiative is intended to provide a more thorough assessment of a borrower’s credit history. In the past, lenders were required to collect physical documentation of pay stubs and tax data to support a loan. The new initiative will allow lenders to use employment and income information from Equifax, which may include payment information on credit cards, mortgages, or student loan accounts that are not necessarily reflected in traditional documentation like pay stubs. This should provide lenders with a broader picture of a borrower’s credit history, which will make life easier for lenders while providing more credit opportunities for borrowers.


Building off the first initiative, Fannie Mae is also introducing a new tool to automate the manual process that lenders currently use to underwrite loans for clients without traditional documentation. The new tool, part of Desktop Underwriter, should drastically reduce the amount of work for lenders when constructing a loan for borrowers without a credit score. Currently, wholesale lenders must calculate a credit score manually for borrowers without credit. The new tool will make the mortgage process more efficient and should reduce the burden on lenders.


Fannie Mae is also introducing a data validation service and self-service reporting portal for customers and partners. The data validation service will further reduce the hassle for lenders of tracking down income-verification documents.


All told, there was a lot of good news for wholesale lenders this week. The housing market trends suggest growth and stability over the next six months, and the new tools introduced by Fannie Mae should generally reduce the burden on lenders during the mortgage process.

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