According to a press release shared with Housing Wire, Freddie Mac said on October 17 that it will examine bank account data for borrowers to determine a history of positive monthly cash-flow activity as part of its loan purchase eligibility analyses.

According to the organization, this action would be made available to mortgage lenders starting on November 6 through its automated underwriting system, Loan Product Advisor (LPA), to increase homeownership prospects. Blend, Finicity, FormFree, and PointServ are the initial service providers supporting the LPA borrower cash-flow assessment.

According to Freddie Mac, the evaluation can only positively impact a borrower’s credit risk assessment once borrowers provide their consent and enable lenders and brokers to identify 12 or more months of cash-flow activity for inclusion in the tool’s risk assessment.

The information will come from checking, savings, and investment accounts, as well as those utilized for direct deposit of salary and regular bill payments, including rent, utilities, and auto loans. Using LPA’s asset and income modeler, this financial account data can be gathered from selected third-party service providers using the same automated procedures they apply to validate assets, income, employment, and on-time rent payments (AIM).

Before making this announcement, only a few months had passed since Freddie began using timely rent payments as part of its underwriting platform. Both initiatives demonstrate the industry’s continued efforts to broaden access to homeownership by using alternative credit data. In addition, since those with “low-or-no” FICO credit ratings are not well served by current risk assessment, underbanked persons and people of color may profit significantly from these initiatives. To read more on this initiative, click here.