Fannie Mae new rule makes a new “Mortgage approval process”.

The mortgage phrase “cleared to close” just lost most of its meaning. Lenders now have incentive to revoke a mortgage approval all the way up until the time of funding.

Scary, scary stuff.

New Mortgage Approval Process

1. Apply for Mortgage

2. Check Credit

3. Underwrite and approve

4. Check Credit AGAIN

5. Fund Loan

The days of a “Loan Contingency Removal” just disappeared.

What you need to know:

It’s being called The Loan Quality Initiative. In an attempt to minimize “bad loans”, Fannie Mae is asking lenders to take more responsibility for their files, then putting them on the hook if things go bad.

Beware the 11th-Hour Credit Score Re-pull

In the new LQI environment, Fannie Mae wants lenders to verify that an applicant’s credit profile did not change while the loan was in underwriting. If the profile did change and the lender happens to “miss” it, Fannie Mae might then refuse to buy the loan, burdening the bank with a loan (and possibly a loss).

To make sure the loan is saleable to Fannie Mae, banks will look for evidence of any of the following events occurring while the loan was being underwritten:

• Did the applicant apply for new credit cards?

• Did the applicant run up existing cards?

• Did the applicant finance an automobile, or other major purchase?

BE extra careful with your credit between the date of application and the date of closing. Anything that goes on a card can be used against you as grounds for revoking your approval-

Even if your loan is cleared-to-close.

For help with your mortgage approval, or guidance on a successful loan closing, click here to send me an email. I am happy to walk you through it

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