Loan Quality Initiative

Fannie Mae has begun to require specific data and processes on all new loan undewrites as part of a Loan Quality Initiative (LQI). This LQI includes various changes that will be implemented at different times in the coming months.

For those that are not aware, Fannie Mae is the backer on roughly 80% of all residential mortgage loans in today's market. When you hear the word "conventional" loan, it means that there is an 80% chance that the loan will be underwritten to Fannie Mae's standards no matter what lender you are using.

The first hurdle in the LQI is labeled as "undisclosed credit and liabilities". In order for a loan to close the underwriters and lender will have to represent and warrant the fact that the loan was underwritten with all of the borrower's credit and liabilities taken into account.

This means all loans will be closely analyzed for credit inquiries that could have resulted in new deb that has not found it's way onto a credit report and the time of applicaiton. A written statement fomr the borrower may be required, itemizing out the inquiries and the reason for the inquiries. If the borrower states they have obtained new debt, the loan will need to be underwritten based off of the new debt load as well as the new credit score.

BOTTOM LINE: WHEN YOU APPLY FOR A MORTGAGE LOAN AND GET AN APPROVAL, DO NOT GO BUY ANYTHING ON CREDIT, USE YOUR CREDIT CARDS, OR APPLY FOR NEW CREDIT. IF YOUR SCORE DROPS YOU COULD BE IN BIG TROUBLE OR AT LEAST IT WILL COST ADDITIONAL TIME AND CONDITIONS.

Please call me if you have any questions!