Super Contributor
ShanetheMortgageMan
Posts: 7,767
Registered: ‎09-28-2007
Big change for Fannie Mae June 1st, verification of liabilities just prior to funding

As part of Fannie Mae's Loan Quality Initiative (LQI), they are requiring that as of June 1st, lenders will need to confirm (not just accept the borrowers word for) that all debts of the borrower, including those incurred during the application process, are disclosed on the final loan application and and included in borrower qualification.

 

That isn't really a big change, because it is already a requirement, however as a suggestion Fannie Mae provided tips, including the refreshing of a borrowers credit report just prior to closing.  As if there weren't already enough ways to screw up a loan, now there is one more, and it could be likely lenders will implement this practice.  This means that if your score changes by a point that your loan would have to go back to underwriting using that new credit report.  So if you were at a 620 score and the lender requires a 620, and you are at a 619 after the re-check, you need to somehow get that back up in order to close on the loan... or if a credit card that you payoff monthly happens to report before you had a chance to pay it off, and your debt ratio doesn't qualify with the new payment.  This is huge if you are in escrow planning on closing, if perhaps you had a collection pop up during the application process, or a "refresh" of a delinquency that was old (as sometimes junk debt collection agencies will do after seeing a mortgage inquiry), or if simply the reporting date on a credit card falls just before.  So now it's more important that ever to not incur any new debt, keep balances no higher than what they were when your credit report was initially checked, and for those of you who have a blemish or a few on credit, make sure they are all taken care of not to "irritate" any new potential negative marks on credit.  

 

Fannie Mae hasn't made that an absolute requirement, however in webinars that they've put on they have stated that lenders will need to use the new FICO score and of course all of the payments on liabilities from the new report.  Alternatively Fannie has suggested that lenders verify with each creditor on the credit report that no new debt was incurred, however the cost and time of doing that would far outweigh just rechecking credit.   Fortunately I haven't had one lender come out and say they will be rechecking credit, but it's not June 1st yet, so we'll see how many of them change their policy & requirements come Tuesday.  Just giving you a heads up.

 

https://www.efanniemae.com/sf/lqi/index.jsp

https://www.efanniemae.com/sf/lqi/pdf/undiscliabtips.pdf