5202.4: Additional requirements for Borrowers with usable Credit Scores (11/09/16)

© Freddie Mac Single-Family Seller Servicer Guide

For Manually Underwritten Mortgages, Freddie Mac requires the use of Fair Isaac Corporation (FICO®) scores with accompanying reason codes in underwriting the Borrower's credit reputation. A FICO Score is an effective tool in evaluating a Borrower's credit reputation; however, it does not necessarily indicate that the Borrower's credit reputation is acceptable. The reason codes indicate the most important reasons why a FICO score is not higher and must be used by the Seller to identify the credit factors that need to be addressed in determining the Borrower has an acceptable credit reputation. Because FICO scores evaluate the information in the Borrower's repository credit file at the time the FICO score was created, a Seller underwriting with FICO scores will find much of the evaluation of the Borrower's credit reputation is already reflected in the FICO score and accompanying reason codes.

Sellers must select one Credit Score from all usable Credit Scores obtained for an individual Borrower that quantifies the credit reputation risk for that individual Borrower. For Borrowers with a usable Credit Score, a minimum Indicator Score of 620 is required.

Sellers should refer to Exhibit 25, Mortgages with Risk Class and/or Minimum Indicator Score Requirements, and to the Guide sections referenced in Exhibit 25 for minimum Indicator Score requirements. Additionally, Sellers should also review the Guide and other Purchase Documents for additional special requirements, which may not appear in Exhibit 25 to determine the eligibility of Mortgages for which Freddie Mac requires a minimum Indicator Score.

When manually underwriting with FICO scores, the Seller must not use the following factors as offsets for weaknesses in the Borrower's credit reputation because they have already been considered in creating the FICO score: