On June 1, 2010, Fannie Mae’s new Loan Quality Initiative (LQI) became effective. The purpose behind the LQI is to detect compliance issues with Fannie Mae mortgages prior to delinquency or foreclosure. The emphasis is on getting more complete underwriting data that might uncover problems with loans before they are issued.
Part of the LQI requires any lender who wishes to sell mortgages to Fannie Mae to “determine that borrower liabilities incurred up to, and concurrent with, closing are disclosed and evaluated in qualifying the borrower for the loan”. The best way to do this is to run an additional credit report before closing. The LQI does not explicitly require a credit check, but lenders will likely run one to meet the requirements.
Running a second credit check could have big implications. The first issue is if a borrower has undertaken any new debt during the loan process. If they have, the closing could be delayed until the lender is able to look into the issue further.
For more information: Fannie Mae