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Market News and Trends, The Business of Real Estate

Fannie Mae Loan Quality Initiative

For those of us who work with home buyers and mortgage lenders routinely, it has been clear for a long time that mortgage underwriters were getting more cautious — and rightfully so.  More thoughtful review of borrowers’ qualifications a few years ago would have prevented the mortgage crisis we have experienced in the past two years. 

Last minute credit checks have become fairly common, and I have even seen employment verification redone after closing.  (If the borrower’s employment situation changed since the previous verification, this could have prevented funding — obviously an “awkward” issue after both buyer and seller have completed all the other steps in conveying a home.)

Effective June 1, 2010, Fannie Mae has instituted their own “Loan Quality Initiative,” aimed at identifying undisclosed debt.  This initiative requires that lenders making loans that will be sold to Fannie Mae must pull an up-to-date credit report within 3 days before closing.  If the borrower’s credit situation has changed, or there are debts that were not properly disclosed at the time of original loan application and processing, the result could be higher fees and/or interest rate, or the loan could denied altogether!

This specific program is required for Fannie Mae loans, but given all the changes in the mortgage industry it is worth anticipating similar requirements for virtually all new loans — to be sold to Freddie Mac or insured by FHA or guaranteed by VA.  Undisclosed debt is a critical issue in defaults on all kinds of mortgage loan.

To help prevent this and other related surprises, this summary of the Top 10 Credit Don’ts is an important document.

About Bill Morris, Realtor

Many years of business experience (high tech, client service, business organization and start-up, including almost 20 years in real estate) tell me that service is the key to success and I look forward to serving you. I represent both buyers and sellers throughout the Austin metropolitan area, which means first-hand market knowledge is brought to bear on serving your needs. Learn more about my background and experience, my commitment to my clients, my profession, and to the real estate industry at


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