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Fannie Mae issues work-around rules for mortgage approvals

Posted by Editor on January 8, 2019
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Verification of employment, Social Security numbers, tax documents and more could prove problematic during the partial government shutdown.

Fannie Mae released guidance this week for lenders on how they can continue to originate mortgages in the absence of some normally standard paperwork.

The partial government shutdown is now 14 days old and could leave a rising number of home closings in jeopardy the longer Congress and the president fail to agree on a spending bill.

To keep the home lending process moving forward, Fannie Mae – a buyer of mortgages that helps keep banks lending – issued guidelines that deal with events out of buyers’ and lenders’ control.

Fannie also released guidance about obtaining IRS transcripts and information from the Social Security Administration during the shutdown. For example, Fannie will allow tax transcripts from the IRS to be received after closing, in some cases. According to the rules, however, a Social Security number must be validated prior to the sale or Fannie Mae will not purchase the loan.

The government shutdown also doesn’t mean government employees are ineligible for mortgages, according to Fannie Mae. “If a borrower is furloughed on or after closing of the mortgage loan due to the shutdown, the loan remains eligible for sale, provided the lender has been able to obtain all required documentation (for example, pay stubs, IRS W2s, verbal certifications of employments) prior to the delivery of the loan,” Fannie Mae says.

Some problems may arise in validating a government worker’s employment status during the shutdown. If lenders are unable to obtain verbal verification of employment during the shutdown, for example, the lender can obtain verbal verification of employment after the loan closing and up until the time of loan delivery. Fannie’s guidance states that military borrowers can use a Leave and Earnings Statement dated within 30 calendar days prior to the note date in place of a verbal verification of employment.

Fannie’s guidance to lenders involving how to proceed with originations in the government shutdown are temporary policies but effective immediately.

“They will automatically expire when the federal government resumes full operations,” according to Fannie Mae’s letter. “If the shutdown lasts for a prolonged period, we may provide additional guidance.”

Source: Fannie Mae Lender Letter LL-2018-06

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