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"Agents For The Homebuyer"
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"Agents For The Homebuyer"
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1. High income borrowers who have little or no cash on deposit, indicating undisclosed liabilities.
2. Young borrowers who have substantial cash
in the bank, which may indicate a "gift" from parents or friends.3. Deposit
verifications showing round dollar amounts.
4. Significant changes in deposit balances during the two months prior to the loan application.
5. Applicants showing high income but having no credit cards.
6. Multiple lines of credit opened at the same time for no apparent reason.
7. Spouses who claim to have no credit history.
8. High income applicants.
9. An employer's address listed as a P.O. box.
Presence of any of these "red flags" on a mortgage loan application won't necessarily disqualify the applicant. However, these guidelines are expected to make it harder to get approval on the popular "low-doc" and "quick-qualifier" loans as lenders will be looking more closely and critically at loan applications with any of the "red flags" listed. By working closely with local lenders, Fannie Mae hopes to dramatically reduce the number of bad loans. By current estimates, on average, borrower nonpayment results in 8,000 foreclosures annually. This system is designed to reduce the number of foreclosures by spotting bad loans before approval. As an additional incentive, lenders who do not follow the new system, may be required by Fannie Mae to buy back properties when borrowers default.
It has been well established in the real estate industry that anyone with enough desire can find financing to buy a home. There are literally hundreds of ways for buyers to get financing. Even people with bad credit or no job can get loans without lying or doing fraudulent things that would raise red flags.
By looking closely at borrowers who raise
red flags, Fannie Mae hopes to head off some future losses that will make
owning real estate better for all of us.
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