The Real Estate Bloggers

Taking Out A Mortgage? Banks Will Monitor Your Credit 24/7 Now

Posted: 31 Aug 2010 06:54 AM PDT

FannieMae Fannie Mae is taking a dim view of mortgage borrowers who try to scam the system by taking out new loans while their mortgage is being processed. Typically banks will check your debt to income ration in the beginning of the application process.

Some borrowers took that as a green light to add debt right after they qualified for the new loan. Now banks will be expected to monitor for new debt or take out a 2^nd credit report just before the mortgage closes.

It is a smart move for both lenders and borrowers alike to have this check in place. Banks know what kind of debt limits families can live with, and what debt limits get them in trouble. The limits are a protective layer for all involved. To circumvent them will give the homebuyer a short term gain, however the long term pain will be felt for a long time to come.

So I applaud Fannie Mae for this move. It is an example of smart lending and good for all parties.

Although Fannie made no reference to specific services in its recent clarification letter to lenders, some commercially available programs claim to be able to monitor mortgage borrowers’ credit activities on a 24/7 basis, flagging such things as inquiries, new credit accounts and previous accounts that did not show up on the credit report that was pulled at the time of initial application.

One of those services is marketed by national credit bureau Equifax and dubbed “Undisclosed Debt Monitoring.” Aimed at what Equifax calls “the quiet period” between application and closing — often one month to three months — the system is “always on,” the company says in marketing pitches to mortgage lenders.

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Taking Out A Mortgage? Banks Will Monitor Your Credit 24/7 Now