NeWS to KnOW

A new program, referred to as the Loan Quality Initiative (LQI), put out by Fannie Mae is an attempt to minimize the number of bad loans being created. This is a response to the surge in foreclosures since 2007. Most of the changes included in this program will not directly affect mortgage applicants. The initiative requires mortgage bankers to complete a few more steps prior to giving their clients final loan approvals and sitting down at the closing table. There is one major hurdle to consumers in the new program.

Mortgage companies are now required to do a credit score re-pull right before closing. This will make sure that the consumer’s credit did not change at all while the loan was in underwriting. Some of the changes that will be looked at include new lines of credit being opened and increases to existing credit or loan balances. If the new credit report reveals changes, the loan is subject to a complete re-underwrite and a possible turndown. The LQI is another layer of protection for the government agencies that often buy the loans.