Fannie Mae is so far gone they’ll be back any minute! I’m putting up a virtual high five to Joe Weisenthal from Business Insider and his “The Best Line on Fannie and Freddie You’ll Read All Day.”
OK…FNMA had established a Loan Quality Initiative (LQI) to ‘identify and implement policy, process, and technology enhancements to improve the compliance with underwriting and eligibility guidelines and mitigate repurchase risk.’ In layman’s terms, they put another layer of disclosures and review processes on top of the plethora of other disclosure and review processes recently put in place (like HVCC, MDIA, etc.)
And then there’s the standard aftermath of tweaks and adjustments that don’t make sense, don’t fix anything, and only serve to confuse an already confused process? Confused?
So now it seems that lenders are responsible for ensuring that the buyer has not incurred any additional debt just prior to closing, but they are to do it without pulling a credit report?
That’s right! Fannie Mae says that the lender is now ‘NOT required to obtain a new credit report to verify the additional debts.’ So…if my Crystal Ball is in the shop, how am I to accomplish this feat? And if FM was never really dictating that new credit reports be pulled just prior to closing, they why did they make those suggestions? (The fact that I have lost track of the question marks in this post is testimony to my bewilderment.)
Fannie very clearly states that a new credit report is not needed, but the lender is still liable to have processes in place that will discover any undisclosed liabilities that may have been incurred after the original credit report review.
At the end of the day…I will continue to do whatever I need to make sure that the borrowers I represent are low risk and are put in the best mortgage product for their situation; and if all else fails I will pick up my Crystal Ball, grab a cape, and hop the Barnum and Bailey freight train.