Running into the credit issue where past short sale credit appears as a foreclosure and results in a Fannie Mae Refer Denial? Follow these steps to do the workaround in the Fannie Mae Desktop Automated system.
Do you still run into the issue where your borrower receives a DO/DU Refer/Caution when past short sale credit appears as a foreclosure in the Fannie Mae automated underwriting system (AUS)? Fannie Mae developed a workaround to correct this within their system. Retrieve this document: Fannie Mae Prior Derogatory Credit Event: Borrower Eligibility Fact Sheet and follow the steps in this video to input the correct information to change a Refer/Caution to an Approve/Eligible within the Fannie Mae DO or DU AUS if this is the only reason that is causing the loan denial.
Steps to follow within Fannie Mae DO/DU upon receiving Refer/Caution:
Under Risk Eligibility, findings will state “Desktop Underwriter has identified the following pre-foreclosure sale on the credit report….” The account name and number producing this message will show up below the statement.
Go to top of findings and click on LOAN INFORMATION.
Go to the left column. Scroll down to Full 1003 and click.
This opens to an expanded list. Click on Declarations.
A new page, Edit Loan: Full 1003: Declarations opens. Make sure that NO is picked in row c. Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years? Go to bottom of the right column and click on blue Explanation button.
The Declarations Explanation page opens. On row c. insert Confirmed CR FC Incorrect. Click on OK and resubmit.
Short sale must be 4 years + 1 day minimum for this to work in Fannie Mae.
This will not work in Freddie Mac automated underwriting system as there is no workaround in Freddie Mac.
If you need any additional help or have questions, contact us today.