On a previous blog, we discussed Fannie Mae’s new Loan Quality Initiative, which forces mortgage lenders to obtain “refreshed” credit reports (i.e., a second credit report after the potential buyer is preapproved) before they allow a buyer to close on a home.
Fannie Mae says the reason for this extra credit report is to check for any additional debts or new lines of credit the borrower may have opened in the time since the original report was obtained. If they have, it could signal that the potential borrower was only “playing nice for the camera,” and not actually as savvy with their credit as they said they were.
Now, any borrower who was originally approved faces a serious risk of having their sales canceled – and in some states, their deposits forfeited – unless they could find help with credit repair fast. Obviously, the new rule hasn’t been the biggest hit among potential borrowers since it was instated last month.
Well, it turns out you’re not the only one who isn’t a fan of the new practice – lenders are crying foul on Fannie Mae as well. Many are complaining the new policy is creating even more problems than it’s worth, making the lending process a logistical nightmare that are only slowing down the home buying process in a time when it’s struggling to recover.
Reading the fine print
It seems the complaints have actually made an impact, because the mortgage giant said that it would be reviewing its policy and intended to offer more detailed guidance to lenders by the end of July. A statement on the company’s website claims that Fannie Mae didn’t intend on requiring additional credit reports, only that they wished to reemphasize already existing policies. They also removed any reference to pulling “refreshed” credit reports from their online guidance documents.
Many lenders are still anxious about what to tell potential borrowers what to do about their credit reports until Fannie Mae clears the air on the confusion. Most insist that a borrower’s pulled report is just a picture of an ever-changing history. As one lender put it, "People can't shut down their lives for 60 days while they're purchasing a home."
It’s all on you now
On the other side of the spectrum, Fannie Mae insists they’re not trying to impose any outrageous new requirements on lenders, they only want to remind them that any borrower who takes on new credit or debts up to their closing is at their risk. Lenders insist a second credit report isn’t necessary unless there’s already cause for concern before the first report is pulled, otherwise they’ll only waste valuable time needed to close the sale.
Wondering what you should do in the meantime if you’re looking to buy a home?
