Fannie Announces New Version of Desktop Underwriter
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae announced the latest version of its Desktop Underwriter (DU) software last week, but the enterprise isn’t treating this like the usual release.
For starters, Fannie has announced version 12.0 nearly two months before it’s released. The enterprise is also using multiple channels to promote the new version, including a promotional video, a white paper, and a Perspectives Blog, in addition to the software release notes.
What makes this version so special?
“With DU V. 12.0, we have made changes to the DU Risk Assessment risk factors, enhanced our assessment of borrowers with limited or no credit, increased the number of borrowers who may be eligible for a Cashflow assessment, and made technical updates that may allow for more frequent adjustments to the DU Risk Assessment in response to changing market conditions,” wrote Steve Holden, senior vice president of Single-Family Analytics.
Holden also wrote that the new version improves the ability to assess the riskiness of loan applications, which “gives us confidence that we and our credit partners can rely on the DU Risk Assessment through all market cycles.”
He wrote that mortgage underwriters may observe more loans receiving an “Approve/Eligible” recommendation that would have previously received an “Approve/Ineligible” or “Refer with Caution” recommendation in the current version of DU.
Risk factor updates and enhancements on DU Version 12.0 include:
Removal of revolving debts and variable income when evaluating a borrower’s debt and income.
Adjustment to how student loan debt is evaluating, as a result of its research showing that borrowers with student loan debt performed better than those without it, assuming similar total debt levels and other risk factors.
Mitigating the risk of a borrower being a first-time buyer, with research showing that first-time buyers performed better than others with similar risk factors.
Expanded use of rent payment history data.
Expanded Cashflow assessment to apply to all borrowers, instead of limiting its use to just borrowers without a credit score.
In addition, Fannie is expanding the types of loans eligible for borrowers with no credit score. Currently, only certain transactions such as principal residences and fixed-rate mortgages are permitted when no borrower on the loan application has a credit score. If at least one borrower has a minimum of one credit amount or installment account on their credit report, then there are no limitations on loan purpose or occupancy, even if no borrower on the application has a credit score.
The latest version also expands eligibility when one borrower has a credit score, but another borrower on the application does not.
“Fannie Mae has maintained a focus on continuously improving the DU Risk Assessment over DU’s 29-year history,” Fannie wrote in its white paper. “DU V. 12.0 represents another major step forward in DU’s ability to analyze mortgage delinquency risk, with significant improvements in the underlying DU Risk Assessment, that enables us to continue to provide a steady and stable source of mortgage financing to borrowers across the U.S. and facilitates Fannie Mae and our partners to continue to work toward a more equitable and accessible mortgage finance system.”
Fannie said it will implement Version 12.0 the weekend of January 11, 2025. Fannie will retire DU Version 11.0 at that time, and customers will no longer be able to resubmit loan casefiles to DU Version 11.0. Customers will be able to view online loan applications and DU Underwriting Findings reports that were created under DU Version 11.0.
Loan casefiles created in DU Version 11.1 and resubmitted after the weekend of Jan. 11 will continue to be underwritten through DU Version 11.1.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
