WASHINGTON – Oct. 9, 2013 – Fannie Mae is in the process of upgrading Desktop Underwriter (DU), its automated underwriting system, to ensure that lenders have sufficient flexibility during the underwriting process to approve borrowers who accidentally end up with a foreclosure on their credit report. In many instances, a borrower may be qualified for a loan after enough time has passed following a pre-foreclosure sale; however, in some of the credit bureau files, the data offered undermines the borrower by showing that his home went through foreclosure when the residence was technically offloaded in a pre-foreclosure deal. In those cases, both a foreclosure sale and a pre-foreclosure sale appear on the same credit report. Fannie Mae’s Stephen Pawlowski says the secondary lender requires a two-year waiting period before a borrower can qualify for a home loan following a pre-foreclosure sale – but borrowers who undergo foreclosure must ride out a seven-year waiting period. Currently, borrowers with a pre-foreclosure sale and a full foreclosure on their credit report get rejected for the longer period of time – seven years – so the technical error delays their admittance into the underwriting process and the housing market. Fannie Mae says fixes take effect Nov. 16. It will include instructions to lenders instructing them to through DU to ignore foreclosure information on credit reports if a pre-foreclosure sale is also listed.
Posted on: Wed, 09 Oct 2013 19:37:53 +0000
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