Subject: Alternative Credit and Non Traditional Credit Reports - tip of the day

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Today is Thursday, February 09, 2012

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Turn time is 48 hours.

Tip of the day – Alternative Credit and Non Traditional Credit Reports

For FHA loans-

4155.1 1.C.5.e Use of an NTMCR When There Is Insufficient Credit Report Information

A lender may use an NTMCR developed by a credit-reporting agency that documents all non-traditional credit references when the information in the standard credit report is not sufficient to make a prudent underwriting decision. If an NTMCR

If an NTMCR is not available, the lender must develop its own non-traditional credit history consistent with the traditional credit report requirements described in HUD 4155.1 1.C.3.

4155.1 1.C.5.f Guidelines for Determining That a Borrower Has Sufficient Credit References

In order for the underwriter to determine that a borrower has sufficient credit references to help evaluate bill paying habits, the credit history must

•	include three credit references, including at least one from Group I (below), and

•	exhaust all Group I references prior to considering Group II for eligibility purposes, as Group I is considered more indicative of a borrower’s future payment performance.

The table below lists the Group I and Group II categories of credit references the underwriter can use to determine if a borrower has a sufficient credit history.

Group Number

Types of Credit References

Group I

•	Rental housing payments (subject to independent verification if the borrower is a renter)

•

Utility company reference (if not included in the rental housing payment), including

–

gas

–	electricity

–

water

–	land-line home telephone service, and

–

cable TV.

Note: If the borrower is renting from a family member, the lender should request independent documents to prove regularity of payments, such as cancelled checks.

Group II

•	Insurance premiums not payroll deducted (for example, medical, auto, life, renter’s insurance)

•	Payment to child care providers made to businesses that provide such services

•	School tuition

•	Retail stores credit cards (for example, from department, furniture, appliance stores, or specialty stores)

•	Rent-to-own (for example, furniture, appliances)

•	Payment of that part of medical bills not covered by insurance

•	Internet/cell phone services

•

A documented 12 month history of savings evidenced by regular deposits resulting in an increased balance to the account that

–	were made at least quarterly

–	were not payroll deducted, and

–	caused no insufficient funds (NSF) checks

•	Automobile leases

•	A personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments

Note: Lenders must underwrite borrowers with no Group I trade references using the criteria set forth in

•	HUD 4155.1 4.C.3.b, and

•	HUD 4155.1 4.C.3.c.

Thank You!

Neil Johnson

Gateway Mortgage Group

National TPO Operations Manager

4201 N. State Hwy 161

Irving, TX 75038

neil.johnson@gatewayloan.com

Office: 972-908-3390  ext. 118

fax# 918-858-8392