Fannie Mae has announced that all mortgage applicants will need to show any and all debts that they have incurred after they submitted their mortgage application or any debts that were never disclosed in the initial application.
Furthermore, loan officers will verify that applicants have not financed a new car, taken out a personal loan or any other new credit that might make it more difficult for the applicant to afford their monthly mortgage payments.
Some of the techniques that Fannie expects lenders to use will include in-house or commercial fraud-detection systems that have the ability of tracking the applicants' credit files from the day their loan request is approved right up to the moment they close escrow.
Some commercially available fraud-detection programs claim that they can monitor mortgage borrowers' credit activities on a around the clock where they can catch credit inquiries on new credit card accounts or any previous accounts that did not show up on the initial credit report that was pulled when the application applied to the lender.
The national credit bureau Equifax last year alone found nearly $142 million in auto loan payments that either loan officers failed to detect or home loan applicants failed to mention.
On Average those loan accounts had balances of more than $350 a month which is more than enough to disqualify many borrowers on maximum debt-to-income ratio standards imposed by Freddie Mac, Fannie Mae and other major lenders.
The reason there is such a sudden concern about new debts incurred after mortgage applications is because Fannie and others have learned about a key type of consumer behavior pattern that has triggered big losses for the mortgage industry in recent years. What often happens is that some buyers and refinancers delay creating new credit accounts until they have cleared all the strict underwriting tests on the debt-to-income ratios to get approved for a mortgage loan. Once they clear that hurdle they then splurge which often adds debt loads that can run into the tens of thousands of dollars. If those new accounts had been seen on their credit files when they submitted their application, many borrowers might have been turned down for a mortgage loan, or at the very least be required to make a larger down payment or pay a higher interest rate.
A new policy of Fannie puts the burden of finding those debts right on the lenders or the loan officers' shoulders. If these debts are not found, then the lender will most likely be forced to endure a forced "buyback" of the mortgage from Fannie Mae.
Buybacks in the billions of dollars have been demanded by Fannie Mae and Freddie Mac this year alone which seems to be making lenders even more eager to conduct some type of updated credit check or place a continuous monitoring system on borrowers applying for loan applications.