Changes in how real estate mortgage loans and closings are processed just keep coming. The latest lender mandate from Fannie Mae affects loan applications made after June 30, 2010. Realtors®, home buyers and homeowners who are refinancing should be aware of how the new rules may affect them.

Lenders will now be required to do a "soft" credit re-pull (soas not to affect the borrower's credit score) as well as a re-verification of employment, intent to occupy and social security validation, and to check the parties' names against a HUD/GSA "excluded party list." Negative findings in any of these areas could trigger the re-underwriting of the loan and a need for additional documentation. This, of course, could delay the closing or even cause it to be suspended. For example, any change in debt-to-income ratios of 2% or more (even less if the loan exceeds guidelines) will require a re-submission to underwriting.

Further, the discovery of any new debt delinquencies will mandate a complete credit re-pull and underwriting. If there are any new inquires shown from other creditors, it must be certified that these did not result in new debt. There are also specific requirements regarding business tax returns and cash flow analysis for borrowers who own more than 25% of their employing company, and full disclosure of child support and alimony obligations.

To protect against such issues delaying or suspending the closing, borrowers should be careful to provide complete disclosure when applying for a loan and should not apply for or incur additional debt prior to the closing. Changing jobs during the processing of a loan or prior to the closing could also be problematic. Any changes whatsoever should immediately be brought to the lender's attention.

It is expected that these policies will soon be adopted throughout the industry and will be a consideration in every mortgage loan. Borrowers should always remember that anything less than total honesty and full disclosure of factors affecting their financial qualifications could delay or suspend the closing, or, even worse, be construed as mortgage fraud.

Source: RISMedia's REAL ESTATE, August 2010, Important Changes to Mortgage Underwriting Could Affect Many Buyers, by Jim Dinkel and Ken Trepeta.

Bob Dohn
Coldwell Banker Residential Brokerage
140-A S. Roselle Rd., Schaumburg, IL 60193
Direct phone: 847-301-3126
Web: www.BobDohn.com