FAQ's for Fannie Mae's announcement that they are requiring 2nd credit reports just prior to closing

1. Fred Marquez
Manager / Mortgage Advisor
Direct: 207-837-3421
Email: FredM@FairwayMC.com
FAQ’s for new Fannie Mae 2nd Credit Report requirements
Fannie Mae announced on May 12th, 2010 that they would require lenders to pull a 2nd credit report or get an update
to the original credit report pulled at the initial borrower application (effective 6/1/2010). This can and will present
many challenges in the months to come. However, like we have all become a little tougher and thicker skinned over
the past 24 months we must embrace this change as well. Specifically, Fannie Mae’s announcement says:
Lenders must take steps to proactively identify any and all undisclosed liabilities that may affect the loan
approval in relation to underwriting guidelines, eligibility parameters, or pricing. It is the lender’s
responsibility to develop and implement its own business processes to support compliance with Fannie
Mae’s requirements on loans delivered to us. Although many lenders already have such processes in place,
Fannie Mae is providing some tips for lenders to consider:
1. Refreshing a credit report just prior to closing may uncover additional debt or credit inquiries.
2. New vendor services are becoming available to provide borrower credit report monitoring services
between the time of loan application and closing.
3. Credit inquiries listed on the credit report should be investigated to determine whether the borrower
did in fact open additional debt resulting in repayment obligations. In some cases, it is possible to
obtain a direct verification with the creditor associated with the inquiry.
4. Fraud-detection tools are available through multiple vendors that assist lenders in identifying
undisclosed mortgages or other potentially fraudulent scenarios. Two examples of available
services:
A Mortgage Electronic Registration System (MERS®) report can be run to determine if the borrower has
undisclosed liens and/or if another mortgage is being originated. MERS® ServicerID is a free service
available to the public that allows users to obtain servicer information on properties with mortgage liens
registered in the MERS® system. This service can be accessed via https://www.mers-servicerid.org/sis/.
MERS® subscribers and members are provided more detailed information through the MERS® Link service.
Other vendor services are available that provide information via a multi-lender cooperative, which is a
database through which lenders share borrower loan application and closing data. The information can
identify undisclosed mortgages that are in the origination stage or that are recently closed.
Thus, I have prepared the following FAQ’s to serve as an aid when applying for a mortgage:
Question 1. I want to buy a new car to drive up to my new house that I am closing on in 30 days. Will this
impact my credit?
Answer 1. This can most certainly impact your credit score, but more importantly it will affect the amount you
may be preapproved for. For example, if you were preapproved for a maximum $250,000 mortgage
Fred Marquez
Fairway Independent Mortgage Corp
Manager / Mortgage Advisor
Direct: 207-837-3421

2. with a 10% down payment, but buy a car two weeks before closing with a new $425 car payment you
are more than likely going to have your preapproval lowered due to the new car payment.
Question 2. I went shopping today at a department store and they offered me a 10% discount if I applied
for one of their store credit cards. Will that impact my preapproval?
Answer 2. It can have a negative impact for a couple of reasons:
1. You allowed the store to pull your credit. This in itself places another credit inquiry on your report.
Depending on how many credit inquiries you have had over the past twelve months that could
impact you with by lowering your credit score by a few points. If you were close to the credit score
minimum as it was, then this might be the nail in the coffin.
2. If you were approved for the credit card and immediately started charging items then the new
minimum payment for the credit card will have to factored into your initial loan application.
Question 3. I have a couple of old credit card accounts with zero balances. Is it ok if I close them as I
don’t intend on using them any further?
Answer 3. Do NOT close any accounts on your credit report as this may trigger some of the credit bureau
models to make a change to your credit score. Even if you have a credit card with a zero balance
that you have had for years; do not close that account during your application process.
Question 4. What if I am late paying a certain creditor on my credit report?
Answer 4. Do not make any late payments during your application process (this will almost guarantee a closing
delay). Do whatever it takes to keep all your accounts current during the application process.
Question 5. My brother asked me to co-sign so he can get a credit card. Will that have an impact on my
mortgage application?
Answer 5. It can be a negative factor as stated in answer # 2 above.
Question 6. Is there anything I can do with my credit during the mortgage application process?
Answer 6. That is the million dollar question. Fannie Mae has stated very clearly they are looking at any
miniscule activity on your credit report. Fannie Mae has placed the burden on us, the lender, to re-
pull or update your credit report. Given the logistic complexity of all the things that can impact your
credit score, I highly recommend you spend time at the beginning of your application to discuss
questions with your loan officer.
Question 7. What information goes into calculating a credit score?
Answer 7. Credit scores use information from three key areas of your credit report: account information (such as
credit cards, auto loans, student loans and mortgages), public records (such as tax liens or
bankruptcies) and inquiries (requests by lenders to view your credit). Information such as race,
gender, where you live and marital status are not used in credit scores.
Fred Marquez
Fairway Independent Mortgage Corp
Manager / Mortgage Advisor
Direct: 207-837-3421

3. Question 8. How often do credit scores change?
Your credit score changes as your credit report changes. Therefore, it can change often since new
information is added to your credit report all the time.
Question 9. Does having too many credit cards affect a credit score?
Having too many credit cards with either high balances or large amounts of credit available can
negatively impact risk scores, depending on the overall credit history.
Question 10. Do late payments affect a credit score?
Paying bills on time is generally the single most important contributor to a good credit score. Being
late on any bill, for any length of time, is a possible indication of future nonpayment of debt and is
almost always viewed negatively by lenders. Any late payments will remain on your credit report for
up to seven years.
Question 11. How does a collection account appear on the credit report?
While you make payments on your collection account, the status will remain "collection account."
Once you pay the account in full, then it will show "paid collection." A paid collection account will
remain on the credit report for seven years from the initial missed payment that led to the collection.
If you would like a version of this FAQ with the ability to add all your contact info and then use as a hand-
out, just send me an email at FredM@FairwayMC.com and I will send you the digital copy of this letter.
I hope you this information was of value to you. If I can provide any professional mortgage advice to you or your
customers please call me direct at 207-837-3421.
Keep an eye out for a new website that my team and I are in the process of creating (currently the site directs you to
my personal mortgage website. That will change within the next 7-10 days (lots of data to upload).
www.TheMortgageResearchCenter.com .
The goal of this website is to provide numerous articles of interest to both consumers and real estate agents.
Additionally, we will keep it updated with any regulatory or guideline changes that could impact real estate
transactions. Thank you for your time and I hope that when the sight is launched you will find it a valuable resource
of knowledge and information, Fred
Fred Marquez
Manager / Mortgage Advisor
Direct: 207-837-3421
Email: FredM@FairwayMC.com
Fred Marquez
Fairway Independent Mortgage Corp
Manager / Mortgage Advisor
Direct: 207-837-3421