The following policy concerning “thin credit” is effective for new submissions beginning April 6, 2010.

A “thin credit” file exists when the primary occupying borrower (the individual with highest percentage of income in the transaction) has a credit score, however, they do not meet the following criteria:

  • At least three open tradelines with a 12-month satisfactory history, including at least one open tradeline with a 24-month satisfactory history
  • “Authorized User” tradelines do not count towards the tradeline requirement

An application with thin credit can be approved under the following circumstances:

AUS Approve/Eligible loans

  • If the borrower can document a 12-month satisfactory housing history (mortgage or rent), no further documentation is required.  The 12 month housing history must be documented with canceled checks, bank statements, or money order receipts.  A VOR or landlord reference letter cannot be used to satisfy this condition.
  • If the borrower cannot document a 12-month satisfactory housing history, then the documentation specified in FHA Mortgagee Letter 2008-11 must be obtained.  Specifically, at least three references must be provided from “Group II” (the Group II list is provided at the end of this announcement).

Manually-Underwritten loans

  • The borrower must be able to provide a 12-month satisfactory documented housing history (mortgage or rent).  The 12-month housing history must be documented with cancelled checks, bank statements, or money order receipts.  A VOR or landlord reference letter cannot be used to satisfy this condition.  If the housing history cannot be provided, the application cannot be approved.
  • The borrower must also provide the documentation specified in FHA Mortgagee Letter 2008-11.  Specifically, at least three references must be provided from “Group II” (the Group II list is provided at the end of this announcement).

Exceptions

Exceptions can be considered by management at an LTV of 80.00% or less.

Credit Scores

  • Credit reports must be run using all three repositories (EXP, TU, EFX).
  • All borrowers must have at least one credit score, unless an exception is granted.
  • Exceptions can be considered for a co-borrower with no score in the event that they:  (1) are not the primary wage-earner, (2) are not solely providing the majority of the assets for the transaction, and (3) the primary borrower is an owner-occupant.

Group II alternate tradelines

Insurance coverage, i.e., medical, auto, life, renter’s insurance (not payroll deducted); payment to child care providers – made to a business providing such services; school tuition; retail stores – department, furniture, appliance stores, specialty stores; rent to own – i.e., furniture, appliances; payment of that part of medical bills not covered by insurance; Internet/cell phone services; a documented 12 month history of saving by regular deposits (at least quarterly/non-payroll deducted/no NSF checks reflected), resulting in an increasing balance to the account; automobile leases, or a personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments.

If you have any questions, please contact your AE.

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