Fannie Mae has been instituting new guidelines, which will affect the loan origination process. According to policies set forth in the Fannie Mae Loan Quality Initiative (LQI), Lenders are responsible for identifying and disclosing any new debts borrowers may have incurred just before closing, checking related parties against exclusionary lists, and validating Social Security numbers (SSN) throughout the origination process.
“Lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing of the subject mortgage are disclosed on the final loan application and included in the qualification for the subject mortgage loan…”
“…Fannie Mae’s updated policy requires that lenders determine that the borrower has not established additional debt on or prior to the closing date. If additional liabilities are discovered, lenders must consider any such additional debts of the borrower in the qualification.”
Lender that discover new information that could impact the performance of the loan may have to resubmit the loan.
“Examples of situations in which loan casefiles should be resubmitted… if new derogatory information is detected and/or the credit score has materially changed.”
Additionally, going forward, loans found by Fannie Mae to be in noncompliance are subject to repurchase by the lenders.
“if Fannie Mae determines that any debts were not adequately disclosed on the application nor included in the debt-to-income ratio such that the loan would not have met Fannie Mae eligibility requirements, the mortgage loan will be subject to repurchase by the lender.”
Essentially, this means lenders are responsible for identifying and disclosing credit activity that has occurred between the time the loan is approved to the time it closes. Fannie Mae recommends a few key steps to help ensure compliance with its LQI.
- Refresh credit reports just before closing to identify any new inquiries or debt obligations
- Investigate new inquiries to determine whether the borrower does in fact have any additional debt to repay
- Validate SSN with solutions such as ID Risk Review, Level One authentication, or SSA89 verifications
- Credit Comparison report to quickly identify differences from initial report and refreshed report
- Help Avoid repurchase with a refreshed CIC credit report
Identify new activity and debt obligations your borrowers may have incurred prior to, or concurrent with, the closing of their mortgage.
- Credit Inquires
- New derogatory and material score changes (score optional)
- SSN and fraud alert validations (optional)
- Public Records
With a refreshed credit report from CIC, you’ll get updates on the critical information Fannie Mae expects you to disclose. Plus, you have the option of initiating a hard or soft inquiry, so there doesn’t have to be an additional impact to borrowers.
Call for information on Fannie Mae LQI and how CIC can keep you in compliance 800-352-5882 or sales@ciccredit.com
