Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.
The last-minute credit report will be designed to find out whether you have obtained — or even shopped for — new debt between the date of your loan application and the closing. If you've made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card, you name it — the closing could be put on hold pending additional research by the lender.
If you've actually taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the whole deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.
The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and fraud by borrowers. Fannie's "loan quality initiative" will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers.
Monday, May 17, 2010
Fannie Mae to require a second credit check
More signs that Fannie Mae is cracking down on lax lending standards:
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"In the months immediately following the expiration of the tax credit, we expect measurably lower sales," said Lawrence Yun, chief economist for the National Association of Realtors (NAR).
ReplyDeleteBut there is one factor that has experts really scared: homes that are ready to be sold but haven't been put on the market. Right now, there could be more than 4.5 million homes in "shadow inventory," according to a recent report by Barclays Capital.
This so-called shadow inventory is a recent phenomenon. In the past, inventory was either tight or it wasn't. But now, with home prices so low and so many foreclosures on the market, both homeowners and banks have been waiting to put properties on the market.
"These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there's a hint of good news," said Leslie Appleton-Young, chief economist for the California Association of Realtors.
But as more sellers put their homes up for sale, supplies increase, which will depress prices again. Rinse and repeat ad infinitum
"But as more sellers put their homes up for sale, supplies increase, which will depress prices again. Rinse and repeat ad infinitum"
ReplyDeleteNot exactly. If you are talking about discretionary sellers, this isnt anything new. The people who "sit on the sidelines and rush in when there is good news" happens in every downturn, and they tend to supress the rate of price gains. However, if they appear in enough numbers to push prices down, some pull their homes (and wait for "more" good news), allowing for prices to rise. Again, this isnt anything new. Its all part of the normal recovery process.
What IS new is the presence of alot bank owned homes, and the decision of the banks to either list them en masse, or continue to drip drip drip them onto the market. If the banks all decided to list en masse then we almost certainly would get a true double dip. However, that fear has been present for 2 years now, and thus far drip drip drip has been the favored method of disposition - hence the rising prices we see today.
A Vienna man has been sentenced for masterminding what Fairfax County police have called the largest mortgage fraud operation in the history of the county.
ReplyDeleteRealtor Ruben Rojas, 30, of Vienna, was sentenced in federal court May 7 to five years in prison for leading a mortgage fraud scheme last year that resulted in more than $9 million worth of losses.
In September, a federal grand jury indicted 14 people on mortgage fraud charges who the U.S. Attorney's Office said were responsible for the losses involving about 35 homes in Fairfax County. At the time, Fairfax County Police Chief David Rohrer called the alleged operation the largest in the history of the county.
"This was a criminal conspiracy that produced quick, substantial and illegal profits," U.S. Attorney Neil H. MacBride said.
The economic growth in the real estate market during 2004, 2005 and 2006 "opened up vulnerabilities that were taken advantage of by these individuals," Joseph Persichini Jr., assistant director in charge of the FBI Washington field office, said during a press conference last year when charges against Rojas were made.
Rojas' fraud has had a lasting effect on the county, MacBride said last week.
"Nearly every home in this scheme is now in foreclosure, causing scores of homeowners to see big drops in their home equity and banks to lose millions," he said. "Mortgage fraud continues to be a big threat in this area, and we hope anyone who learns of potential fraud will report it so we can shut it down."
As a result of this case, the U.S. Attorney's Office for the Eastern District of Virginia, based in Alexandria, created a new Deputy Chief position for its Fraud Unit aimed at quelling financial fraud in Northern Virginia, according to the U.S. Attorney's office.
One out of seven U.S. households with a mortgage ended the first quarter late on mortgage payments or in the foreclosure process, although the pace has ebbed now that unemployment appears to have peaked, the Mortgage Bankers Association said on Wednesday.
ReplyDeleteDemand for loans to buy U.S. homes shriveled to a 13-year low last week, following the expiration of federal tax credits, while near-record low mortgage rates stoked refinancing, the Mortgage Bankers Association said on Wednesday.
ReplyDeleteThe data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season," Michael Fratantoni, the industry group's vice president of research and economics, said in a statement.
yawn...
ReplyDeletehttp://www.dailyfinance.com/story/real-estate/chinas-real-estate-bubble-fueled-by-bride-shortage-not-just-fi/19482094/
ReplyDeleteNote the article is only talking about small apartments. The absurd bubble is in China, but the most absurd bubble is still in India. The United States has the cheapest and most affordable housing in the world.
"The United States has the cheapest and most affordable housing in the world."
ReplyDeleteSo THAT'S why all the mexicans come over here!
So the country is becoming browner!!! Well close the borders and halt all immigration for al least ten years ..... Let the whites increase their birth rate .... Voila! Problem Solved!
ReplyDeleteAnonymous said...
ReplyDelete"The United States has the cheapest and most affordable housing in the world."
"So THAT'S why all the mexicans come over here!"
No. You've got cause and effect backwards. The reason we have the cheapest housing is because it's built by Mexicans. j/k.
James,
ReplyDeleteIn that case, lets immigrate the entire nation of Mexico, cause these home prices need to drop a lot more!