Effective today Fannie Mae has set forth new Loan Quality Iniative. The initiative is to tighten up on the quality of the home loans being underwritten. The new initiative could delay or prevent some home purchase closings, if home buyers are not paying attention.
Effectively, FNMA is mandating that a last minute credit report is pulled just prior to closing on a home purchase. While many banks have already been doing so, it is now being required by FNMA. For buyers who have opened credit cards, made large purchases or changed their credit profile in any way, this could be problematic.
At the very least, it could delay a closing while the lender seeks out an explanation for a change in the credit profile. For buyers with allready high debt to income ratios, the results could be disastarous. It could result in the loan not being funded. Even more detrimental than not receiving the home loan is the fact that the home buyers deposit money could be at risk. Most standard purchase and sale contracts state that escrow money is forfeited if the buyer defaults on the mortgage.
Home buyer's need to be aware that they should not change their credit profile in anyway between making an application for a home loan and closing on their new home. Do not open additional credit cards, do not make purchases for your new home, do not purchase a new car, etc.... Get to that closing smoothly.
More on information on the Loan Quality Initiative:
http://www.boston.com/realestate/news/blogs/renow/2010/05/fannie_maes_loa.html
