Fannie Mae is assuring lenders they don't have to pull a new credit report before closing, but they do have a responsibility to ensure the borrower can repay the mortgage.
In a newly released selling guide, Fannie says there has been a "misinterpretation" of SEL-2010-01 and it was not intended to force lenders to pull credit reports or re-qualify borrowers just before closing.
However, Fannie expects lenders to have a process to facilitate borrower disclosures of changes in their financial condition throughout the origination process, according to SEL-2010-11 released on Friday.
And lenders should have "pre-funding quality control processes to increase the likelihood of discovery of materially undisclosed debts," the secondary market agency says.
In cases where additional debt or reduction in income is disclosed or discovered, re-underwriting is required if the debt-to-income ratio exceeds 45% or the DTI increases by 3 percentage points or more.
It also means the loan case files must be resubmitted to Desktop Underwriter with updated information. For manually underwritten loans, a comprehensive risk and eligibility assessment must be performed.
