Effective June 1 (some items July 1) there will be many changes to Fannie Mae which are called the Quality Initiative.  Many o f these changes are trasnparent to the consumer and those involved in the transaction, but could cause some confusion, possibly some delays and some turn downs well into the mortgage process. Being aware of some of these changes can lead to  a continued smooth flow of the transaction and require cooperation from all involved.  Some of the changes are:

  • Confirmation of Social Security Numbers of borrowers (we will almost always need a copy of their social security card now)
  • Confirmation that all parties to the transaction are not listed on the HUD Limited Denial of Participation List and GSA Excluded Party List System (this has always been done on FHA loans, but now will apply to Conventional Loans as well).  This means that we need to check to make sure the Realtors, Lawyers (sellers and buyers), Bank Lawyer, Appraiser, Seller, and buyer do not appear on these lists.  Many times this lists come back with a hit as they are coded by name only.  So do not be shocked if you get a call asking for a copy of your Drivers License or Real Estate license if your name is a “hit on this list”.  Sometimes you may also get a call that your seller needs to provide their id as well if their name came up on the list. By providing a copy of your id this allows us to enter more information into the computer and prove it was not the same person that came up as a hit.  Simple tip to help avoid “hits”, use middle initials on the contract of sale as many times the middle initial of the “hit” is different then yours.  This includes the Realtors middle initial, lawyers middle initial etc.
  • Credit Report-immediately before closing the lender is required to pull a brand new credit report!  It used to be that once we pulled credit it was good for 90-120 days, no longer the case.  The file will be underwritten with the “old credit report” and then right before closing a new one will be pulled and if there are any changes it will need to be re-underwritten, or at least approved by an underwriter. Obviously if the borrower has incurred any new debt, or missed payments since the last pull this could lead to a last minute turn down.
  • Employment-right before closing (usually within 10 days or less) the lender’s staff has to reconfirm employment.  If the employer does not re-confirm employment then the file cannot close.  It is usually just a verbal verification, but some employers won’t do these.  So be aware that if the lender is “counting on doing a verbal” the day before closing, calls the employer, and they refuse stating that it must be in writing, this could delay you as well.
  • Red Flags Rule-This new rule which has had delayed implementation but takes effect June 1 is not a Fannie rule, but rather a “safety” rule for the consumer.  Long story short if we have any warnings pop up on their credit report we may have to meet with them in person to clear up the identity issue or take steps to assure that we are indeed dealing with the person and whom they claim to be.  We have always done this, but now we must back it up immediately with documentation in the file in order to assure that we are covered under this new rule.
    Remember the above rules apply to any conventional loan that is backed by Fannie Mae (almost every conventional loan).  You should not be panicked by these new items, as many will be transparent to you, the Realtor, but I wanted to fill you in on these changes as they will sometimes mean a call that you weren’t expecting.  Information is key in today’s mortgage market and having the knowledge of how to navigate the “new old” mortgage market is the key to addressing your concerns, and getting deals closed.  As a customer yesterday said  as he signed his stack of forms and disclosures “I am not a terrorist, but I still have to go through screening at the airport.  I didn’t help the mortgage market collapse, but I am still paying the price!”.

As always should you have any questions, please do not hesitate to contact myself of any of our loan officers here at Razor. Almost everyone of our deals that hits application stage is closing…yes they maybe taking a bit longer, but they are going through!  We have the experience to navigate this market and stand ready to assist.  Thanks!