Trended Credit Data “Trended data is the most important tool developed by the credit

reporting agencies since the advent of the credit score” -Director of Card Risk, Large Regional Bank, Top 25 Retail Bank

What is trended credit data?

• Currently, credit reports used in mortgage lending only indicate the outstanding balance and if a borrower has been on time, or delinquent, on existing credit accounts such as credit cards, mortgages or student loans.

• Trended credit data provides an expanded, more granular, view of a consumer by leveraging 24 months of a consumer’s past balance, payment, and credit utilization history.

• It provides a more complete picture of a consumer’s credit behavior, supplementing the traditional moment-in-time credit snapshot with a more dynamic 2-year picture of a consumer’s history of managing revolving accounts.

• With 24 months of historical data (such as payment and balance), lenders may be able to determine how consumers have managed their revolving credit accounts over time, allowing them to better predict future behavior and assess potential risk.

“Transactors” vs. “Revolvers”

“A transactor” • A home mortgage applicant with

large credit card balances who has a history of paying in full every month (a “transactor”) is typically considered to be a better credit risk than a “Revolver”

“A revolver” • An applicant with large credit

card balances who only makes the minimum required payment (a “revolver”). Existing credit reports, however, can’t always differentiate between those two consumers

Among other benefits, trended credit data will allow lenders to determine if the borrower tends to pay off revolving credit lines such as credit cards each month, or if the borrower tends to carry a balance from month-

to-month while making minimum or other payments. Trended data will also help lenders differentiate between “transactors” and “revolvers”

*Existing credit reports, however, can’t always differentiate between those two consumers

• In late June 2016, Fannie Mae will require lenders to utilize trended credit data when underwriting loan casefiles through Desktop Underwriter Version 10.0. This data will be provided by Equifax and TransUnion, and allows a smarter, more thorough analysis of the borrower’s credit.

• CIC Credit will extend customers the opportunity to adopt this new credit report format early, at no additional cost, leading up to the June 25th 2016 implementation date. CIC Credit will not pass on any additional fees during this early adoption period..

Beginning April 4th 2016!

When is this change coming?

Which repositories will be providing trending data? • TransUnion and Equifax are the only repositories providing trended data at this time. Experian data may be

added at a later date to be determined.

What will the impact be?

• First introduction of new credit data into the risk assessment for mortgages in the last quarter of a century

• The risk assessment will benefit borrowers who regularly pay off their revolving debt

• Since it looks like a trend, borrowers can make a immediate improvements to their credit assessment by making higher payments on their credit cards

• Shows a monthly history of some key factors for “revolving accounts,” basically credit cards. We can see a 24 month history of several factors, including:

Balance= current balance amount Scheduled Payment= scheduled payment

amount Actual Payment= actual payment amount

• The updated risk assessment will benefit borrowers who regularly pay off their revolving debt

• The trended data will appear on the printable credit report (.rpt or .txt)

• The trended data will not be included in the credit .dat file. No changes were made to the codes, file format, and structure of the .dat

• Trended data will not be used for manual underwriting or for loans underwritten outside of DU

• For loans underwritten outside of DU, lenders do not need to consider trended data in the underwriting and eligibility criteria

• For loan casefiles underwritten through DU, Fannie Mae does not expect lenders to analyze the trended data provided on the printed credit report.

• The process for ordering and reissuing credit reports for use in DU does not change.

Enhancement Impact

Use of trended data in the DU risk assessment allows a smarter, more thorough analysis of the borrower’s credit history.

How will trended data appear on the credit report layout?

New revolving data fields (24 months) will include: Scheduled ($): monthly minimum payment required by creditor

Actual ($): actual payment received as reported by creditor Balance ($): month end account balance as reported by creditor

The appearance of the credit report will change very little. Each quantifying tradeline will simply be appended to include the trended credit data.

Why is FNMA requiring trended data? Trended Credit Data Improves Modeling of Loan Performance In recent years, expanded information on borrower credit histories has become available. What is called “trended credit data” is historical data at a tradeline (credit line) level on several monthly factors, including: amount owed (balance), minimum payment due, and payment amount made. In 2015, Fannie Mae used 3.7 million credit reports with trended data (dated June 2009 through August 2012) to conduct modeling and analytics to support a comprehensive review and redevelopment of DU’s credit risk assessment. Including Trended Data Materially Improved Modeling of Loan Performance Based on findings, Fannie Mae has worked with the credit reporting agencies to have trended data included in the consumer credit reports used for underwriting loans through DU, effective with DU Version 10.0 (scheduled for release the weekend of June 25, 2016). Trended data is not considered in currently available credit scores, so consideration in the DU credit risk assessment will be its first widespread use in the mortgage lending industry.

Why is FNMA requiring trended data? (cont.) Trended Data Empowers Creditworthy Borrowers Including the trended data in DU’s credit risk assessment will: (1) improves the accuracy of DU’s overall risk assessment, and (2) will benefit borrowers who regularly pay off revolving debt, increasing the likelihood that they will receive an “Approve” recommendation from DU. This means that use of trended data in DU’s credit risk assessment can provide more creditworthy borrowers access to mortgage credit. The overall percentage of loans that receive an Approve/Eligible recommendation is expected to remain relatively stable. Giving weight to how borrowers pay off credit debt puts more power in their hands to control their credit evaluation. Payment delinquencies are a significant factor in credit scores, and borrowers can do nothing but wait for the delinquencies to grow ever farther back in time. But when trended data is considered, by paying credit card balances in full or in large part for a few months, borrowers can demonstrate that a late payment was not deeply reflective of their general debt repayment ability and behavior. Based on Fannie Mae’s analysis, borrowers can potentially improve their evaluation by the DU credit risk assessment each month by paying off credit card bills in full.

DU Supports Access to Credit with Prudent Risk Management DU has been the industry leading automated mortgage underwriting system for more than 20 years. DU’s evaluation is fair and objective, applying the same criteria to every mortgage loan application it considers. Fannie Mae is committed to continuous improvement of the DU risk assessment model. Fannie Mae continue to make ongoing investments in its risk management tools, to enable the origination of better performing loans, resulting in reduced costs to service those loans. The addition of trended data to the credit risk assessment is an update that will help to support creditworthy borrowers’ access to mortgage credit while reducing risk.

Why is FNMA requiring trended data? (cont.)

Comparison of Risk Factors Evaluated by DU 9.3 and 10.0 Revolving Credit Utilization

DU Version 9.3 • The establishment, use, and amount of revolving

credit a borrower has available are important. Generally, the lower the balances are on revolving credit as a percentage of the credit limit, the lower the risk. A borrower whose revolving credit utilization is high is considered a greater risk than someone who has a history of managing his or her credit card accounts more conservatively.

DU Version 10.0 • The trended credit data will be used to evaluate the

borrower’s ability to manage revolving credit card accounts. A borrower who uses revolving accounts conservatively (low revolving credit utilization and/or regular payoff of revolving balance) will be considered a lower risk. A borrower whose revolving credit utilization is high and/or who only makes the minimum monthly payment each month will be considered higher risk as it indicates the borrower may have trouble making payments in the future.

When will FNMA start utilizing trended data in its findings? • FNMA’s use of trended data begins the weekend of June 25th 2016 with the release of DU Ver.

10.0 • As an ongoing commitment to our own customers, CIC Credit will extend customers the

opportunity to adopt this new credit report format early, at no additional cost, leading up to the June 25th , 2016 implementation date. CIC Credit will not pass on any additional fees during this early adoption period; however additional fees will be charged beginning Monday, June 27th , 2016.

• It’s our intent to provide ample lead time for your staff to become familiar with trended credit data and for CIC Credit to provide training and address any questions should the need arise. If your company wishes to adopt early to ensure a more efficient transition, please contact us for additional information.

• For clients who do not wish to adopt early during this preliminary phase, trended data will be suppressed within the tradeline layout, however the trended data will still be present in the raw data background file.

• Effective June 1st, 2016 CIC Credit will include all trended tradeline data in the credit report layout as required by Fannie Mae.

When will FNMA start utilizing trended data in its findings? (cont.)

At this time, Fannie Mae has not yet specified how trended data will be interpreted by DU 10.0 as part of the AUS decision process. Fannie Mae has, however, provided the following general information relative to trended data: • The updated DU 10.0 risk assessment will benefit borrowers who regularly pay off their

revolving debt. • Since DU 10.0 will look at a trend, borrowers can make immediate improvements to their credit

assessment by making higher payments on their credit cards. • Trended data will benefit borrowers who regularly pay off revolving debt, increasing the

likelihood that they will receive an “Approve/Eligible” recommendation from DU. • The overall percentage of loans that receive an “Approve/Eligible” recommendation is expected

to remain relatively stable. • Trended data will not be used for manual underwriting or loans underwritten outside of DU. • For loans underwritten outside of DU, lenders do not need to consider trended data in the

underwriting and eligibility criteria. • For loan casefiles underwritten through DU, Fannie Mae does not expect lenders to analyze the

trended data provided on the printed credit report. • The process for ordering and re-issuing credit reports for use in DU does not change.

Why will some tradelines have trended data but others not? Not all tradelines may qualify.

• Do the balances shown reflect the balance before or after the monthly payment? Trended credit data reflects the balance after the monthly payment was made as reported by the data furnisher for the applicable tradeline.

Behavior Patterns Used in Assessing Risk

Consumer A: “Paying Down”

Consumer B: “Steady User”

Consumer C: “Balance Builder”

Trending Credit Data

FAQ’s with

Q. Will the credit report ordering process change? A. No, the ordering process will not change relative to your LOS or ordering portal.

Q. Will trended data impact a consumer’s FICO score? A. No, there will be no impact on a borrowers FICO score as trended data is not utilized in the scoring

model.

Q. Will credit reports used for pre-close (FNMA LQI) include trended data? A. Yes, both Equifax and TransUnion are requiring trended data be included in pre-closing, soft inquiry,

credit reports.

Q. Will trended credit data impact FHA or VA loan casefiles underwritten by DU Version 10.0? A. No, trended data will not impact findings.

Q. Will a re-score be impacted by trended credit data? A. No, trended data is not utilized in computing current mortgage related FICO scores.

Q. Will Freddie Mac accept the new trended tri-merge data in Loan Prospector (LP)? A. At this time, Freddie Mac will not receive the new data elements in machine readable formats; however they should still

receive the new tri-merge human readable print images embedded within the machine readable (XML) formats.

Q. What would be reflected on the credit report if a consumer missed a payment? A. The trended data field would reflect a zero or be left blank depending on how the creditor reported the information. Q. Will loan casefiles created in DU Version 10.0 accept non trended credit reports which may have been pulled prior to the DU 10.0 conversion at the end of June A. No, any credit reports, which were ordered without trended credit data which users plan to eventually submit to DU

should be submitted by the weekend of June 25th, 2016

FAQ’s with

FAQ’s with

Q. Why do some trended data fields reflect no information while others have information on the same tradeline? A. Not all creditors report every data field.

Q. Do balances shown reflect the amount before or after the monthly payment? A. Balances will show the amount after the monthly payment was made.

Q. When will trended credit data be available in MISMO? A. Our understanding is MISMO has added containers for trended data in their 3.4 version; however, they

are actively reviewing a possible solution for MISMO 2.3 with more information expected soon.

Q. Will there be an additional cost associated with trended data? A. Yes, both Transunion and Equifax have indicated there will be additional fees.

FAQ’s with

Q. Will the way clients order credit reports today change? A. No. The process of ordering credit reports will remain the same as always.

Q. Do I need to make system changes to address Freddie Mac’s requirements? A. If you have a proprietary system with a direct connection to Freddie Mac, please review with Freddie Mac directly. They can address technical requirements to support Freddie Mac. Q. Can additional months of trended credit data be requested (beyond what is provided in the report)? A. Trended credit data is only available for 24 months at this time.

Q. Will trended Data increase my credit report fees? A. Yes, Trended Data will add a significant increase to credit report fees and secondary use fees also.

Questions? Thank you for your time!

Theresa M McCoy Account Manager

813-205-1397 tmccoy@ciccredit.com