Introduction
This section talks about how a lender should look at a borrower’s history of making payments.
Payment History
When a lender is deciding if they should give a loan to a borrower, they need to carefully look at the borrower’s credit report. The credit report tells the lender about every loan or credit account the borrower has. It shows if payments were made on time or if there were any late payments. It’s important to check how recent any late payments were and how serious they were – for example, if they were a few days late or more than 90 days late.
A good credit history is one where there are no late payments or accounts that have been sent to collections or written off as losses. It’s also good if there are no major issues like foreclosures (losing a house to the bank), giving the deed back to the lender instead of going through foreclosure, bankruptcies (legally declaring one can’t pay debts), or any other legal issues made public, like court judgments or tax liens. These kinds of records show the borrower is less likely to have trouble paying back the loan.
If a credit history has late payments, it’s seen as riskier, especially if those late payments are recent. If payments were late by 30, 60, 90 days, or more, the lender must decide if these were one-time problems or if late payments happen often. They need to look at everything – how many accounts the borrower has, how much of their available credit they’re using, and if they’ve tried to get more credit recently. For example, if a borrower has a history of late payments and is also trying to borrow more money while using a lot of their credit, it’s considered risky.
Credit histories that have foreclosures, deeds-in-lieu (giving the property back to the lender to avoid foreclosure), or public records like bankruptcies or court judgments are seen as even riskier. The more recent these issues are and the more there are, the riskier it is to lend to the borrower.
For details specifically about mortgage payment history, there’s another section called B3-5.3-03, Previous Mortgage Payment History.
Recent Related Announcements
There have been no recent announcements related to this topic.
If you have questions about these rules or how they apply, Fannie Mae offers resources where you can get answers directly from the source. They encourage lenders to reach out for the information they need.
References
For more details, visit Payment History of the Fannie Mae Selling Guide.