Unless Loans Start Flowing Foreclosures will Not Stop

There is the possibility that a controversial practice of Fannie Mae and Freddie Mac could nip loan applications in the bud. Very few know about it.
Suppose one has a credit score of 800 and good equity on the property that he or she wants to refinance taking advantage of the prevailing low interest rates. Apparently it seems that it should be smooth sailing all the way. But the bank apologizes as the automated underwriting system of Fannie Mae will not accept because there is a disputed account otherwise known as ‘tradeline.’

The applicant then goes on to explain that the dispute related to say a medical bill or charge of credit card was valid and that subsequently the account was closed. At that time the creditor had given the assurance that the dispute mark would be removed but in reality did not do so. But such explanations will not melt the loan officer and the application becomes invalid.
The crux of the issue is that unless loans start flowing foreclosures will not stop.

The consumers are guaranteed under the Fair Credit Reporting Act the right to dispute wrong information on any of their accounts in the credit files. When a consumer challenges the information a note has to be made on this file. So long as this note remains most credit scoring methods will not be affected by this dispute. But by raising an objection Fannie Mae, functioning under the observation of the federal government, denies granting loans only because the consumers had enforced legal rights.

Amy Bonitatibus of Fannie Mae agreed that the computerized underwriting system was being used by nearly all the lenders who are having business dealings with Fannie Mae. Consequently those applications with disputed marking were turned back. She reiterated that her firm does “not prohibit delivery of a loan … where the borrower has disputed information” on the credit report. By manual underwriting she explained, “Our policy requires the lender to determine and document whether or not the disputed information is accurate and underwrite the borrower’s credit accordingly.”

According to some the banks refuse the loans and use a flimsy excuse to pass on the blame to Fannie Mae and Freddie Mac.

One individual brought to notice that applications for purchasing a condo was turned down by a national lender despite the bank acknowledging “all of the accounts have a zero balance, are in good standing, and show no other derogatory information.” But hours spent on the phone talking to creditors and credit agencies proved to be totally futile.

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