While it has always been good practice for loan offers to tell buyers not to make any large purchases unitl after settlement, this new Fannie Mae initiative should make this topic more of a priority.
The Loan Quality Initiative from Fannie Mae is its response to the foreclosure problem. "This program shifts the onus of mortgage guideline compliance away from the government backed group and to the individual banks responsible for making the loans" says Dan Green, mortgage broker in his blog.
I think the bottom line is that lenders and Realtors need to remind our clients unitl they have actually settled, they should not to open credit, buy a car, etc. They should continue to make at least the minimum payments (even more if possible). Basically do anything to keep the credit scores up.
Bottom line, this initiative will be having the banks pull at the very last minute for the latest credit profile of the borrower and may recalculate debt to income ratios and could bump the client out of loan approval.
Dan Green's blog is easy to understand and complete, click on the above link if you are concerned about this issue. (graphic from Dan Green. themortgagereports.com)
Laura T. Woodbury 703-967-8181
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