Fannie Mae’s Loan Quality Initiative (LQI) is forcing home buyers to obtain mortgages based on "refreshed" credit reports or risk their closing being canceled and, in some states, their deposits forfeited. In other words, the buyer is not officially approved for the mortgage until the results of second credit report are approved. There may be other last-minute verifications of undisclosed liabilities, such as job status, that may be "refreshed" as well.

Example: Buyer A listed his three credit cards on his loan application. The lender approved Buyer A's credit and approves the mortgage loan request, partially based on this information. Buyer A goes to a “store” and applies for fourth credit card. The day before the closing, the lender refreshes his credit to make sure his credit score is still as good as it was when it was pulled the first time. The lender discovers that Buyer A's credit score has been lowered because Buyer A applied for the fourth credit card. It's called finding an "undisclosed liability". Under the LQI, the lender could delay the closing, increase the interest rate, ask for a larger down payment, cancel the closing or in some states, lose his deposit.

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