Written By: Frankie Lacy, Op-Ed Writer
Effective August 16, 2014 Fannie Mae will make several changes to Desktop Underwriter version 9.1. The changes are applicable to all loans submitted or resubmitted on or after August 16th. The changes are as follows:
DU will now allow lenders to disregard foreclosure information on the credit report when the foreclosure activity is a deed-in-lieu or a pre-foreclosure sale (aka short sale). Lenders must go to the explanation box in question C of the declarations section of the full loan application and type the following:
“Confirmed CR PFS” for pre-foreclosure sale, or
“Confirmed CR DIL” for deed-in-lieu
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If the lender’s loan origination system is integrated with DU, they may need to go to DU on the web to execute the necessary steps.
Foreclosure information can be also be ignored in DU when a lender is able to verify that foreclosure information is inaccurate. Lenders must go to the explanation field for question C and type “Confirmed CR FC Incorrect”. Similarly, lenders now have the option to notify DU that a foreclosure was due to extenuating circumstances. In the same explanation box for question C, lenders must type “Confirmed CR FC EC”.
DU will use the information entered in the comments section to dismiss the foreclosure from its eligibility assessment. The findings report will include a statement that the foreclosure information was not used in the eligibility assessment because DU was instructed by the user to underwrite the loan without it. It is the lender’s responsibility to then document loan compliance with all requirements in the Fannie Mae Selling Guide.
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DU is also updating deed-in-lieu of foreclosure and pre-foreclosure sale messaging. The new message will reflect the updated waiting period of four years prior to eligibility for new financing. Mortgage accounts that have been charged off will also require a four year waiting period. DU will identify charged off mortgage accounts as those reflecting a manner of payment of “9” on the credit report. Loans that demonstrate extenuating circumstances as defined by the selling guide will only be subject to a two year waiting period.
Remember, these loans would require the additional data entry in the explanation box of question C. In these cases, it is up to the lender to document the exact date of the deed-in-lieu, short sale, or charge-off if the information is not clearly identifiable on the credit report.
The full release notes can be found at:https://www.fanniemae.com/content/release_notes/du-do-release-notes-0816...
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
