B3-2-10: Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report (07/25/2017)
- Marsha Freeman
- Kacey Olson
© Fannie Mae Single Family Selling Guide
Ensuring DU Data and Delivery Information Accuracy
The data submitted to DU must reflect the loan as it was closed, including occupancy type, product type, amortization, loan term, property type, loan purpose, sales price, and appraised value.
Verification documents must be reviewed and the verified values compared to the data submitted to DU. The terms of the closed loan must match the terms of the final loan casefile submission in DU or fall within the tolerances listed in the following table:
| Data Attribute and Description | Trigger | Action Required |
|---|---|---|
| DU loans (excluding DU Refi Plus) — the result of these changes causes the DTI ratio recalculated by the lender to increase by 3 or more percentage points up to the maximum of 50% DU Refi Plus loans — the result of these changes causes the DTI ratio to increase by 3 or more percentage points | Loan casefile must be resubmitted to DU |
| Interest rate on fixed-rate and adjustable-rate mortgages | Interest rate decreases, not as the result of a permanent interest rate buydown | No resubmission required |
| Interest rate on fixed-rate and adjustable-rate mortgages | Interest rate decreases as the result of a permanent interest rate buydown | Loan casefile must be resubmitted to DU |
| Verified income used to qualify the borrower for loans subject to HUD median income limits; for example, as with community lending mortgages. | Income is greater than the loan application indicates | Loan casefile must be resubmitted to DU |
| Assets — Funds Required to Close | The actual amount of assets required to close the transaction exceeds the amount of “Funds Required to Close” per the DU Underwriting Findings report | If the lender has documented sufficient liquid assets to cover the actual amount of assets required to close the transaction, no resubmission required Otherwise, loan casefile must be resubmitted to DU |
| Assets — Reserves Required to be Verified | Due to changes in the actual amount of assets required to close the transaction, the verified amount of reserves is less than the “Reserves Required to be Verified” per the DU Underwriting Findings report | If the lender has documented reserves that equal at least 90% of the Reserves Required to be Verified per the DU Underwriting Findings report, no resubmission required Otherwise, loan casefile must be resubmitted to DU |
| Loan amount tolerances for refinance transactions | (See below) | |
DU Tolerances for Refinance Transaction Loan Amount Changes
For refinance transactions, Fannie Mae allows the following tolerances to the loan amount:
The loan amount may increase $500 or up to 1% of the loan amount, whichever is less.
The loan amount may decrease 5% of the loan amount.
The loan amount tolerances are permitted provided the new LTV/CLTV does not result in
changes to the amount of required mortgage insurance coverage,
different loan-level price adjustments, or
changes to loan eligibility.
For example, if a loan casefile is submitted with a loan amount of $100,000 and the appraised value is $120,000 (which equals 83.3% LTV), the actual loan amount can go up to $100,500 (which equals 83.75% LTV) without requiring resubmission.
On the other hand, if the original loan amount was $108,000 (90% LTV), an increase without resubmission is not permitted because it would result in an LTV of 91%. The higher LTV requires different mortgage insurance coverage, and may result in the loan not being eligible for delivery.
The loan amount tolerance does not apply to Fannie Mae’s requirements regarding the amount of cash back to the borrower on a limited cash-out refinance transaction. (See B2-1.2-02, Limited Cash-Out Refinance Transactions.)
Other Errors in the Credit Data
In some cases, errors are the result of reporting errors by the credit agency or individual creditors.
If the printed credit report contains derogatory information, and DU does not recognize or consider the derogatory information and does not reflect the derogatory information in the DU Underwriting Findings report, the lender must take action when information not considered by DU would result in a recommendation other than that returned by DU.
For example, if a borrower’s credit report indicates that the borrower had a previous foreclosure, but the DU Underwriting Findings report does not reference the foreclosure, a reporting or data transfer error may have occurred, thus preventing DU from considering the foreclosure in its analysis of the loan. The lender must take action to ensure that the information is considered in the risk analysis.
Non-Applicant Debts/Accounts
In a small number of cases, credit reports may include accounts identified as possible non-applicant accounts (or with another similar notation).
Non-applicant accounts may belong to the borrower, or they may truly belong to another individual.
Typical causes of non-applicant accounts include
applicants who are Juniors/Seniors,
individuals who move frequently,
non-related individuals who have identical names, and
debts the borrower applied for under a different Social Security number or under a different address (these may be indicative of potential fraud).
When DU encounters possible non-applicant accounts on the credit report, DU will include the accounts in the credit risk assessment, and will issue a message in the DU Underwriting Findings report alerting the lender of the existence of the accounts. If the debts are on the loan application, DU will also include them in the DTI ratio. If the debts do not belong to the borrower, the lender may provide supporting documentation, remove the debts from the loan application, and resubmit the loan casefile to DU in order for the DTI to be updated to exclude the non-applicant debts.