Every engine needs a tune-up once in awhile. And Automated Underwriting [AU] engines are no different. With all of the major changes in the past year, it is hard to just tinker after all. Sometimes, an overhaul is the right medicine. DU, the Fannie Mae AU system is rolling out a new model June 1st for loans delivered by September 1st. Credit tightening, elimination of pricing adjustments [EA] for riskier credit, waiting times after bankruptcies and foreclosures, and many other changes will be included. Now the EA system really never made a lot of sense. Essentially, a borrower with a lower credit rating would not qualify for the best rates. So, instead of declining the file, the AU system would say yes to a higher rate. Someone who will no doubt struggle with the higher payment, PMI, etc. will get approved.
Not anymore. PMI is not availabele for EA offerings. And it is even more difficult to get the best rates unless you have a superlative FICO score. I guess it is a reward of sorts, but maybe there should have been a premium available to good credit risks instead of a penalty imposed on those who were less than stellar. A conference call tomorrow will reveal a lot of these real changes and I will update you all with the highlights. Well, maybe they aren't highlights as much as they are points of emphasis. Freddie Mac's Loan Prospector AU engine is sure to get updated soon as well. Then there will be the minor tune-ups as there are more changes in automated underwriting.