The number of nontraditional credit sources that must be documented for a borrower without a credit score differs depending on the underwriting method and loan product, as described in the table below:
|Number of Nontraditional Credit Sources Required|
|Underwriting Method||Loans other than HomeReady Loans||HomeReady Loans|
|Manually underwritten loans||
|Loans underwritten through DU||
The types of credit that can be used to develop a nontraditional credit history are those that require the borrower to make periodic payments on a regular basis with intervals that are no longer than every three months.
The lender must conduct an informational interview with the borrower to identify all of the sources from which the borrower obtained credit over the most recent consecutive 12 months. If the lender is requesting a nontraditional mortgage credit report from a consumer reporting agency, the agency will conduct the borrower interview and obtain the list of available nontraditional credit sources.
In all cases, the payment history for each credit reference must be documented for the most recent consecutive 12-month period. All credit sources must be included, not just those that reflect acceptable performance.
The following nontraditional credit sources may be used to develop a nontraditional credit history for the borrower:
Rental housing payments. This includes payments made to a landlord or management company. Also included are payments made on a privately-held mortgage loan that is not reported to the credit bureaus, contract for deed payments and other similar arrangements, provided the payments are related to the borrower’s housing.
Loans underwritten through DU where a nontraditional credit history is required must include rental housing payments as one source of nontraditional credit.
Manually underwritten loans do not require that one source of nontraditional credit be rental housing payments. However, if no borrower on the loan is able to document a rental payment history, a minimum of 12 months’ reserves must be documented.
Utilities, such as electricity, gas, water, telephone service, television, and internet service providers. If utilities are included in the rental housing payment, they cannot be considered a separate source of nontraditional credit. Utilities can be considered a source of nontraditional credit only if the payment history can be separately documented.
Medical insurance coverage (excluding payroll deductions)
Automobile insurance payments
Cell phone payments
Life insurance policies (excluding payroll deductions)
Payments for household or renter’s insurance
Payments to local stores, such as department stores, furniture stores, appliance stores
Rental payments for durable goods, such as automobiles
Payment of medical bills
Payment of school tuition
Payments for child care
A loan obtained from an individual, provided the repayment terms can be documented in a written agreement
Checking account, savings account, voluntary payments made to a payroll savings plan or contributions to a stock purchase plan, provided the records reflect an increasing balance as a result of periodic deposits over at least the most recent 12 months. Contributions must have been made no less than quarterly.
Wire remittance statements demonstrating a consistent amount of funds remitted over the most recent 12-month period.
The table below provides references to the Announcements that have been issued that are related to this topic.