Second Credit Report To Be Required At COE

Fannie Mae To Require Second Credit Report Before Closing

From National Mortgage News:

Beginning June 1, lenders originating mortgages being sold to Fannie Mae will have to pull a second credit report just before the loan closes. The new quality control requirement is designed to prevent a type of mortgage fraud called "shotgunning," but the guidelines could send lenders on wild goose chases. Will Dillard, a vice president of operations at SettlementOne Credit Corp., a San Diego reseller of credit data, told American Banker that pulling a second credit report would help stop such frauds but that lenders might also waste time checking out false alarms. "If they see another inquiry, Fannie would like to see lenders query those creditors," Dillard said. "If you're at the funding table ready to fund and you see a new inquiry popping up, the question is, do you send your underwriter out...to track down Honda Motor if the borrower is also trying to buy a new car?"

My question is--what if the debt ratios or score changes before settlement? Will the loan be re-underwritten? Can they actually change the GFE at that point because a new score allows for a "change in circumstances"?

JMO:

Of course the obvious concerns exist, such as if there is a drop in score or inquiries could be borrower be declined or the loan re-underwritten. But the other question exists as well, if the borrower's score has improved to a point where they may be entitled to a lower interest rate or more favorable terms would the file be subject to review as well. I see a lot of problems developing while they try to work out the logistics of this situation.