Does Fannie Mae require a new credit report right before closing? The answer to this question is no.
It is true that many lenders are in fact pulling a new credit report the day of or just a few days prior to closing. This is due to an mis-interpretation of an announcement that Fannie made in 2010.
On February 26, 2010, Fannie Mae issued Lender Letter LL 2010-03 as part of its Loan Quality Initiative. Part of this initiative involves undisclosed liabilities. The announcement read:
"Lenders are responsible for determining that all debts incurred or closed by the borrower, up to and concurrent with settlement on the subject mortgage loan, are disclosed on the final loan application that is signed by the borrower at closing. These debts must be evaluated and included in the qualification for the subject mortgage loan. Lenders must have adequate internal controls and processes to support this requirement."
Some mortgage companies took this to read that a new credit report is required. That was not Fannie's intention. To further clarify its position, Fannie Mae released announcement 2010-11. This announcement read:
"An unintended consequence of Announcement SEL-2010-01 was the misinterpretation by some lenders that Fannie Mae was implementing a new requirement that the borrower be requalified up until closing. Therefore, many lenders believed this required a new credit report just before the closing of the loan. This was not Fannie Mae's intent, and as previously stated, the intent was and continues to be to reinforce lenders' existing representations and warranties."
In lieu of pulling a new credit report, it is acceptable for an existing credit report to be used so long and it is monitor until he day of closing. This is the most beneficial method since it does not impact the borrower's credit score.
Borrowers do need to be aware that any and all credit inquiries must be addressed before the loan can be funded. This includes inquiries for utilities. The opening of any new credit accounts can impact the borrower's ability to close on time.