Fannie Will Not Require Second Credit Report Pull for Mortgage Approval
The new Loan Quality Initiative 1 (LQI1) from Fannie Mae (FNM) is not going into effect for another week and already misinformation is spreading, according to the government-sponsored entity. A source at Fannie tells HousingWire that reports in the press are misstating the actual provisions of the LQI1, coming into force June 1. The source says that a second credit report on the borrower needn't be pulled near to closing on the mortgage, although "a lender may choose to do so," he said. The LQI1 (which can be downloaded here.) clearly states: "Fannie Mae has not changed the policy as it relates to credit reports." "Credit documents, including the credit report, are valid for 90 days from the date of the report and may not be older than 90 days at time of closing," it continues. However, the document suggests keeping a tally on a borrower's credit-worthiness, as the length of the underwriting process continues to increase and the credit report may change substantially in that time. "Credit inquiries listed on the [new] credit report should be investigated to determine whether the borrower did in fact open additional debt resulting in repayment obligations," the guidance suggests. Fannie also notes that there are several vendors who can help in the department of credit monitoring. For example, Credit Plus took the opportunity last week to remind originators that it offers a whole suite of service to aid LQI1 compliance.To be sure though, the government-sponsored entity does call on any vendor by name. And just today, Equifax (EFX) launched its Undisclosed Debt Monitoring tool that monitors borrowers during the above “quiet period,” calling it "a historical blind spot for lenders" in a press release. The tool follows borrowers and alerts the lender when a change in credit reporting occurs. According to Equifax analysis, up to $142m in auto loan payments were potentially overlooked during the mortgage underwriting process last year. Write to Jacob Gaffney. Additional reporting by Jon Prior. The authors hold no relevant investments.