Borrowers to Face More Scrutiny

David Fletcher of Inman News reports that on June 1, 2010 Fannie Mae rolled out a new set of guildelines for lenders to follow. The Loan Quality Initiative (LQI) provides that a borrower's credit score will be "refreshed" one day prior to closing.

What does this mean? Well, chances are, before you found the home you want to purchase you met with a lender and were preapproved for a loan package. Your credit score played in integral part in determining your interest rate and whether or not you would even get the loan. That may have been 60-90 days before your closing. Your credit score was probably refreshed the day your loan officer received the sale from your real estate broker. Now, besides the long wait to get into your new home, what have you got to do? Buy a new car? Shop for furniture? Don't do it. Something even as mundane as applying for a new credit card can lower your credit score. That would be considered an undisclosed liability. 

Fletcher states:

Under the LQI, the lender could delay the closing, increase the interest rate, ask for a larger down payment, or cancel the closing. In some states, Buyer A could lose his deposit.

Brokers need to have this discussion with their buyer clients...and with their seller clients. There are so many ways in the post recession environment for a closing to be delayed.

Buyers need to make sure that they are talking to their loan officer about these issues. It's hard to do with an online lender. Get someone local, someone you can look in the eye and feel confident that they will be there to help you, your agent, and escrow get your purchased closed on time.