Fannie Mae updates credit score language in DU update

Fannie Mae announced updates to underwriting guidelines, including a change that removes mention of a long-standing minimum credit score benchmark. 

Instead of a minimum score used to address risk, Fannie Mae updated language behind the previous requirement with a minimum credit risk standard based on evaluations made in its Desktop Underwriter system itself.

"The minimum representative credit score requirement of 620 for loan case files for one borrower and minimum average median credit score requirement of 620 for more than one borrower will be removed for new loan case files created on or after Nov. 16, 2025," the government-sponsored enterprise said in its latest update. 

The new guidelines will not change existing policy requiring lenders to purchase borrower credit scores for their own records and assessments. 

"Though DU will no longer apply a minimum credit score requirement, lenders are still responsible for ensuring that credit scores for all borrowers are requested," Fannie Mae noted, referring originators to its selling guide. 

The Federal Housing Finance Agency emphasized the change did not relax existing underwriting standards at the two GSEs it oversees. "As we move toward competition and beyond accepting only one type of credit score model, language in the guide needs to be tweaked," a spokesperson said in a statement.  

How the change could affect lenders

The updated guideline comes amid ongoing conversations in the mortgage industry about how to best evaluate methods to qualify borrowers, including longtime renters and others with limited credit histories. 

"You have a good number of borrowers who don't have credit, or they've got what you would call thin credit — maybe just a credit card open for six months but no other trade lines for whatever reason," said Jon Overfelt co-owner and director of sales at American Security Mortgage Corp. 

"I think for that segment of the population that doesn't have credit or doesn't utilize 'normal' credit, it'll have a big impact."

The change ought to drive an increase in homeownership opportunities for many communities previously underserved, concurred Hector Amendola, president of Panorama Mortgage Group, the parent company of several lenders assisting first-time buyers.  

"A lot of people that I've served over my years in the industry have been Hispanic, and a lot of them show up to the office, and they don't really have much credit. It's almost like we penalized them for that," he said. 

It could also increase the number of options lenders have when proposing products to their clients, with the update opening up conventional offerings to borrowers who may have thought government-backed loans from the Federal Housing Administration were their only choices based on their limited credit history. Such a change would offer cost savings over the life of a loan, Amendola added. 

"If this means that a loan that would normally have had to have been pushed over to an FHA can stay conventional, that can be a big deal. Mortgage insurance on an FHA is for the life of the loan, whereas on the conventional, it comes off once you get to 70% loan to value."

The update comes amid an ongoing dispute between Fair Isaac Corp. and VantageScore over whose metrics can optimally serve the mortgage industry, with the former's FICO Classic offering long the sole score accepted for secondary market sales to Fannie Mae and Freddie Mac. FHFA Director Bill Pulte, whose department regulates both GSEs, took much of the industry by surprise in July when he announced the GSEs would start accepting Vantagescore 4.0 for mortgage eligibility. 

Back-and-forth debates about the benefits and flaws between both credit score providers and have ensued since. While FICO argues its system provides better mortgage predictive accuracy, Vantagescore claims its offerings will help more consumers with limited credit histories become loan eligible through its analysis that includes factors like rental payments. 

While it comes in the middle of the current dispute, the update is as much a reflection of much-needed modernization now that the mortgage industry has a great deal of data in its hands, Overfelt said. 

"The rules that were written by Fannie and Freddie years ago — they haven't been updated fast enough. Times are different," he said. "We have so much more access to information than we did even three years ago, let alone when those foundational rules were written." 

Other Fannie Mae DU updates

Alongside the removal of the minimum credit score language, Desktop Underwriter will also apply rural high-needs designations to new loan case files beginning in mid November. Rural high-needs areas are determined by FHFA to determine eligibility for some acceptance offers and for use in Duty to Serve messaging and its mission index information. 

The Fannie Mae technology will also issue a new message when a loan has obtained representation and warranty relief for non-mortgage undisclosed liabilities. The message will be issued on loan case files when certain eligibility criteria are met.